What Is a DSCR Loan? (Investor Guide)

DSCR stands for Debt Service Coverage Ratio. It compares a property’s monthly income to its monthly housing expenses. If the ratio is high enough the rental income generated from the property can be the only income needed to purchase it.

Formula

DSCR = Monthly Rent / (P&I + Taxes + Insurance + HOA + Flood + MI)

Most lenders want DSCR ≥ 1.20 for best pricing, though approvals can happen at lower levels depending on the program.

How to Improve DSCR

• Increase verified rent (e.g., signed lease or market rent appraisal)
• Buy down the rate or extend the term to reduce P&I
• Lower taxes/insurance with appeals or quotes
• Reduce HOA obligations where possible

Run a quick scenario now with our DSCR Calculator.

Try the tools: DSCR Calculator · FHA Self‑Sufficiency · Schedule E · Home Purchase