Debt Service Coverage Ratio (DSCR)
A ratio that compares a property's rent to its monthly mortgage-related expenses.
Definition
DSCR measures whether a property's rental income is enough to cover its housing payment, and it is a core qualifying metric for investor DSCR loans.
Category: Investor Loans
How DSCR is calculated
In most DSCR programs, the formula is monthly rent divided by monthly PITIA: principal, interest, taxes, insurance, and association dues when applicable. A DSCR of 1.00 means the rent exactly covers the payment. A DSCR of 1.25 means the property generates a 25% cushion.
Why investors care about it
Unlike a traditional loan, a DSCR loan usually does not require your personal income to support the payment. If the property cash flows well enough, that can be enough to qualify.
Where deals get tripped up
A property can miss the target if market rent comes in lower than expected or if taxes, insurance, or HOA dues push the payment up. That is why the rent schedule and insurance quote matter early.
Related glossary terms
- Debt-to-Income Ratio (DTI) - A percentage showing how much of your income goes toward monthly debt obligations.
- Rate Lock - A temporary hold on your mortgage interest rate.
Related loan programs
- DSCR Loans - DSCR (Debt Service Coverage Ratio) loans qualify real estate investors based on the rental income of the property — not personal income or tax returns. They're the go-to program for scaling a rental portfolio.
- Non-QM Loans - Non-Qualified Mortgage (Non-QM) loans are designed for borrowers whose income, credit, or property doesn't fit the strict Qualified Mortgage rules — including investors, self-employed, foreign nationals, and recent credit-event borrowers.