DSCR Calculator
The single number commercial lenders look at first. ≥ 1.25 is "lendable"; ≥ 1.5 is "comfortable"; below 1.0 is "denied".
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The number that gets your loan approved.
DSCR stands for Debt Service Coverage Ratio — it's the ratio of a property's net operating income to its total annual debt service (principal + interest). A DSCR of 1.0 means the property generates exactly enough cash to cover the mortgage; 1.25 means 25% cushion; 1.5 means comfortable cushion after vacancy and bad turns.
DSCR matters because most commercial lenders won't fund below 1.25, and many require 1.30+ for first-time investors. The "DSCR loan" product specifically targets investors who can't qualify via W-2 income — the property has to qualify on its own cash flow, period.
Residential rental investors also care: stricter portfolio lenders (above 4 properties owned) often apply DSCR underwriting even on single-family rentals. If you're scaling beyond your first 1–2 properties, knowing your DSCR before talking to a lender saves you from rejection at the closing table.
- Annual rent: $36,000
- Op-ex (30%): −$10,800
- NOI: $25,200
- Monthly P&I × 12: $26,929
- DSCR: 0.94 (DENIED)
- Needed for 1.25: NOI ≥ $33,661 or rent ≥ $48,087/yr
Most commercial lenders require DSCR ≥ 1.25 for stabilized properties (current tenants, current leases). Bridge / value-add loans may accept 1.10–1.15 on the projected post-renovation NOI, but you'll pay 200+ bps higher rate to compensate the lender for that risk. Below 1.0 is essentially uninsurable as commercial debt; you'd need to raise equity or seller financing instead.
DSCR uses total debt service (principal + interest); interest coverage uses just interest. DSCR is the more conservative measure and the one US commercial lenders actually use. Interest coverage shows up more in corporate bond underwriting where the borrower has perpetual debt that never amortizes — different game.
DSCR loans bypass personal income verification — the lender has to take on more risk because they can't fall back on your W-2 if the property under-performs. Expect 1.5–2.5 percentage points higher than a conventional residential rate (so if FRED MORTGAGE30US shows 6.4%, expect 7.9–8.9% for DSCR). The trade-off: you can scale to 10+ properties without DTI walls.
Yes — it's one of the 6 metrics computed and ranked. The full AI Report ($19) shows your DSCR, flags whether you clear the 1.25 commercial bar, and runs the +1% rate scenario to test if you'd still qualify if rates rise before closing. Useful pre-LOI sanity check.