How is DSCR calculated?
Answered by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
DSCR equals the property's gross monthly rent divided by its full monthly payment (principal, interest, taxes, insurance, and any HOA). A $2,400 rent against a $2,000 payment is a 1.20 DSCR.
A ratio of 1.0 means rent exactly covers the payment; above 1.0 is positive cash flow. Higher ratios earn better terms. We'll run the calculation using market rent from the appraisal.
The simple formula
DSCR divides the property's monthly rent by its monthly debt payment. Rent of $2,400 against a $2,000 payment gives a DSCR of 1.2. The payment includes principal, interest, taxes, insurance, and any HOA dues.
A ratio above 1.0 means the rent more than covers the payment. Below 1.0 means it falls short.
What the number tells lenders
A higher DSCR signals a safer loan and can earn a better rate. Most lenders want at least 1.0 to 1.25, though some allow lower with a bigger down payment.
We will calculate the DSCR on any property for you. Apply now and we will tell you if it cash flows enough to qualify.