DSCR Loan 2027 Calculator (Debt Service Coverage Ratio)
DSCR = Monthly Rent / Monthly Mortgage Payment (PITIA). DSCR loans (no W-2 income verification) require 1.0-1.25 minimum. Top investors target 1.30+ for cash-flow cushion. Source: Kiavi, Visio Lending lender guidelines.
DSCR Loan Definition and Why Investors Use It
DSCR (Debt Service Coverage Ratio) loans qualify borrowers based on property cash flow, not personal income (W-2 or tax returns). Designed for real estate investors who may have low taxable income but high net worth. Lender computes DSCR = Monthly Rent / Monthly PITIA. Minimum 1.0 (rent = mortgage); top tier requires 1.25+. Source: Visio Lending, Kiavi, Lima One Capital guidelines.
DSCR Calculation Includes PITIA Not Just P&I
PITIA = Principal + Interest + Taxes + Insurance + Association dues (HOA). Forget any of these and you'll overstate DSCR. For a $250k loan at 7.5% over 30 years, P&I = ~$1,748. Add $350 taxes/insurance = $2,098 PITIA. At $2,500 rent, DSCR = 2,500/2,098 = 1.19. Just above minimum 1.0, below 1.25 target — many lenders would require a higher down payment.
DSCR Loan Rates vs Conventional Mortgages
DSCR loans typically price 0.50-1.50% higher than conventional 30-year fixed because they're non-QM (non-qualified mortgages). 2027 example: conventional 6.5%, DSCR 7.5-8%. Higher rate = lower DSCR. Often 20-30% down required (vs 15% conventional investor). LTV 70-80% maximum.
Improving DSCR Before Closing
(1) Bigger down payment lowers loan amount and PITIA → boosts DSCR. (2) Different lender — DSCR thresholds vary 1.0-1.25. (3) Look at rents in similar units to support stronger appraisal. (4) Switch to interest-only for first 5 years (lower P&I, higher DSCR — but principal not building). (5) Use rate buydown if seller concession available.
Frequently Asked Questions
What is the minimum DSCR for an investment property loan?
Most lenders require 1.0-1.25 minimum. Top tier with best rates: 1.30+. Below 1.0 typically requires larger down payment or seller financing.
Does DSCR include PITIA or just principal+interest?
Full PITIA (P+I+Taxes+Insurance+HOA). Some lenders also include reserves. Always confirm with lender.
Are DSCR loans more expensive than conventional?
Yes, typically 0.50-1.50% higher rate. Trade-off: no personal income verification, no DTI limits, faster close.
Can I use DSCR loan for short-term rentals (Airbnb)?
Yes, but lenders often use lower 'long-term equivalent rent' or appraiser's market rent vs Airbnb projections. Some specialty lenders accept full Airbnb income with 12-month proof.
What loan-to-value (LTV) can I get on DSCR loans?
Typically 70-80% LTV (20-30% down). Lower DSCR or unstable market typically caps at 70% LTV. Cash-out refinance often 65-75% LTV.