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DSCR Calculator
Enter your rental income, operating expenses and loan to see your DSCR and the maximum loan amount your income supports.
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How DSCR is calculated
- Effective gross income (EGI) = (monthly gross rent + other income) × 12 × (1 − vacancy rate). This is the income actually collected.
- Net operating income (NOI) = EGI − annual operating expenses. Operating expenses include taxes, insurance, management, maintenance and reserves. Mortgage payments are excluded.
- Annual debt service (ADS) = monthly payment × 12, where the monthly payment is the fully amortising payment for the entered loan amount, rate and term.
- DSCR = NOI ÷ ADS. A ratio above 1.0 means the property generates enough income to cover the loan. Most lenders require 1.20–1.25.
- Maximum loan: working backwards from NOI and your target DSCR, the highest principal that keeps the payment within the allowed ratio at the same rate and term.
Worked example
A duplex rents for $2,000/month. With 5% vacancy, effective gross income is $22,800 per year. Operating expenses (tax, insurance, management, maintenance and reserves) total $8,000, leaving NOI of $14,800. On a $200,000 loan at 7% for 30 years the monthly payment is $1,330.60 and annual debt service is $15,967. DSCR = $14,800 ÷ $15,967 = 0.93 — below the 1.20 threshold. The maximum loan for DSCR ≥ 1.25 is about $148,300; at 1.20 it is about $154,500. To make the deal work at $200,000, you need higher rents, lower expenses, or a different loan.
DSCR vs. conventional loan — key differences
DSCR loans qualify based on the property's income, not the borrower's personal income. This makes them popular with investors who have multiple properties or complex income. Here is how the two loan types compare:
| Factor | Conventional investment loan | DSCR loan |
|---|---|---|
| Qualification basis | Borrower income, DTI, employment history | Property cash flow (DSCR ≥ 1.0–1.25) |
| Income documentation | Full: W2s, tax returns, pay stubs | Lease agreement and appraisal; no personal income docs |
| Credit score minimum | 620–680 typical | 640–680 typical; some lenders accept 620 |
| Down payment | 15–25% | 20–25%; higher for short-term rental properties |
| Interest rate premium | Baseline investment rate | Typically 0.5–1.5% above conventional |
| Maximum properties | 10 financed properties (Fannie/Freddie) | No official limit; lender-specific |
| Cash-out refinance | Available; 75% LTV max for investment | Available; lender policies vary |
| Best for | First 1–4 investment properties; W2 income borrowers | Investors with 5+ properties; self-employed; LLCs |
DSCR thresholds by lender type
The minimum DSCR lenders accept varies by program. Most programs also apply a vacancy adjustment (commonly 25%) before calculating NOI, which reduces your apparent DSCR versus the raw number this calculator shows.
| Lender type | Typical minimum DSCR | Notes |
|---|---|---|
| Agency (Fannie Mae, Freddie Mac) | 1.20–1.25 | Standard residential investment property underwriting |
| Portfolio DSCR lenders | 1.00–1.10 | "DSCR 1.0" products exist but carry higher rates and stricter reserves |
| Commercial banks (5+ units) | 1.25–1.30 | May require 6–12 months reserves; add NOI margin for stress testing |
| SBA 7(a) commercial real estate | 1.25 | Based on global cash flow (business + property), not property alone |
| Hard money / bridge lenders | 0.80–1.10 (exit DSCR) | Short-term; they underwrite on exit value, not current income |
| Short-term rental programs (Airbnb) | 1.10–1.25 (STR projected) | Use AirDNA or STR market data; some lenders haircut projections 20–30% |
Thresholds reflect 2025–2026 market conditions. Programs change; confirm with your lender before applying.
Frequently asked questions
What DSCR do lenders require?
Most conventional rental lenders want 1.20–1.25. Some DSCR-loan programs accept 1.0. Commercial lenders often require 1.25 or higher. A higher ratio means more income cushion and a lower risk of default.
What counts as an operating expense?
Property tax, insurance, property management, maintenance, capital expenditure reserves, HOA dues and other recurring costs. Do not include the mortgage payment; it is captured in the debt service calculation.
Why is my DSCR below 1.0?
The property does not generate enough income to cover the loan payments from NOI alone. To fix it: raise rents, cut expenses, increase the down payment to lower the loan, or negotiate a lower rate or longer term.
How is the maximum loan calculated?
The target DSCR implies a maximum annual debt service: NOI ÷ target. From that payment the calculator solves for the loan principal using the same amortisation formula, keeping your entered rate and term.
Formulas last reviewed . Results are estimates for educational use; not financial advice. Methodology →