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.