DSCR — debt service coverage ratio — compares a property's net operating income to its debt service (the mortgage payment). A DSCR of 1.0 means the property earns exactly its payment; lenders offering DSCR loans (which qualify the property's income rather than the borrower's personal income) typically require a cushion above 1.0, with the exact threshold and pricing set by the lender's program. It is the central number in rental-property lending: it converts a rent roll and an expense picture into a yes-or-no on the loan.
The formula / structureDSCR = NOI ÷ Annual Debt Service (principal + interest, and per program, taxes/insurance treatment varies)
DSCR: a worked example
Worked example. A property's NOI is $15,600/yr. The proposed loan's principal-and-interest payment is $1,050/mo = $12,600/yr. DSCR = $15,600 ÷ $12,600 = 1.24. If rates rise and the payment becomes $1,250/mo ($15,000/yr), DSCR falls to 1.04 — likely below a program's floor, so the loan shrinks or the deal changes.
What affects DSCR
- Interest rate and amortization (payment size)
- Rent level and NOI honesty
- Loan amount requested
- Lender program minimums
Get the First-Deal Math Pack — free.
The Math Sheet, the MAO one-pager, and the comping checklist — the one-page math we run before any offer.