DSCR Ratio Explained: How to Calculate and Improve Yours
Your DSCR ratio is the single most important number in a DSCR loan application. Here's how it's built and how to move it in your favor.
The formula, step by step
DSCR = Gross Monthly Rental Income ÷ Total Monthly Debt Service. Debt service (often abbreviated PITIA) includes principal, interest, property taxes, homeowners insurance, and HOA dues if applicable.
Example calculation
Say a property rents for $2,800/month. Principal and interest is $1,850, taxes are $280, insurance is $110, and there's no HOA. Total debt service is $2,240. DSCR = $2,800 ÷ $2,240 = 1.25.
Five ways to improve your DSCR
1) Increase the down payment to lower your monthly principal and interest. 2) Choose a longer amortization or interest-only structure if offered. 3) Shop multiple lenders — rate differences move your payment and therefore your ratio. 4) Verify your rental income estimate is accurate and well-documented (an appraiser's rent schedule or signed lease helps). 5) Consider properties with lower property tax burdens or without HOA dues.
What if my DSCR is below 1.0?
Many lenders still approve loans with a DSCR as low as 0.75–1.0, often with a rate adjustment or additional down payment. It's not an automatic disqualifier — it's one input into pricing.
Use our free DSCR calculator to test different scenarios, then get matched with a lender to see real program options.