DSCR Loan Calculator

What Is a DSCR Loan?

A DSCR (debt service coverage ratio) loan is a non-QM rental property mortgage that qualifies the property's rental income against its monthly debt service, instead of pulling tax returns and W-2s from the borrower. The formula is simple: DSCR = monthly gross rent ÷ monthly PITIA (principal, interest, taxes, insurance, association dues). A DSCR of 1.0 means rent exactly covers debt service; 1.25 means rent covers 125% of debt service (a common Fannie Mae multifamily threshold); 1.5+ is strong investor cash flow. Per FDIC commercial real estate underwriting guidance, regulated lenders generally underwrite DSCR ≥ 1.20-1.25 on income-producing properties. Non-bank DSCR lenders push lower (1.0 with rate adjustment, 0.75 "no-ratio" with 30%+ down). Last updated May 2026.

Who Uses DSCR Loans?

DSCR loans suit four investor profiles: (1) self-employed borrowers whose tax returns understate true income (large depreciation deductions, business expense write-offs); (2) portfolio investors with 5+ rentals who hit Fannie Mae's 10-property cap and need a non-QM lender; (3) house hackers moving out of an owner-occupied home and converting it to a rental who don't want to wait 12 months for rental history; (4) foreign nationals with no US tax returns or credit. The trade-off vs a conventional Fannie/Freddie investor loan: rates run 1.0-1.5% higher (typical 2026 quote: conventional investor 7.0-7.25%, DSCR 7.875-8.5%), origination fees are 1.5-2.5% (vs 0.5-1.0% conventional), and prepayment penalties are common (3-2-1 step-down or 5-year flat). The benefit: closes in 21-30 days vs 45-60 days conventional, and qualifies on rental property income alone.

How to Improve Your DSCR

Three levers improve DSCR: increase rent, reduce expenses, or restructure debt. (1) Rent: lenders use the lower of actual lease rent and Form 1007 market rent appraisal; if your appraised market rent is higher than current rent, push for a rent increase before applying. (2) Expenses: shop insurance (high-deductible policies on investor properties save 30-40%), appeal property tax assessments after purchase if comparable sales support a lower value, and re-tier HOA fees if a master association covers items you can self-manage. (3) Debt structure: extend the amortization term from 30 to 40 years (lowers payment ~10%), choose interest-only first 10 years (lowers payment ~25% during IO period), or accept a higher down payment (each 5% extra reduces P&I about 6-7%). Per Fannie Mae multifamily research, lenders re-test DSCR annually on portfolio loans, so building a buffer above the qualifying ratio matters.

DSCR Loan vs Conventional Investor Loan — Which Is Right?

Use conventional investor loan when: you have W-2 income, < 4-5 financed properties, and want the cheapest rate. Use DSCR loan when: you're self-employed with tax returns that don't reflect true income, you have 5-10+ rentals, you're buying a property where rents already comfortably cover debt, you need to close fast (under 30 days), or you're a foreign national. A specific 2026 example: $400K duplex with $3,500/mo combined rent and $2,800/mo PITIA gives DSCR of 1.25 — qualifies easily as DSCR loan but might not pass a conventional cash-flow test if your personal DTI is already stretched. Run both and compare total cost over your expected hold period — DSCR's higher rate is sometimes worth it for the speed and qualification flexibility.