How a DSCR loan is calculated
For a DSCR loan on a house or small rental, the ratio is usually the property's monthly rent divided by its full monthly payment, PITIA.
| Line | Monthly |
|---|---|
| Rent | $2,700 |
| Principal and interest on $280,000 at 7.5% | $1,957.80 |
| Taxes, insurance and HOA | $500.00 |
| PITIA | $2,457.80 |
| DSCR | 1.10 |
At 1.00 the rent just covers the payment. The smallest down payment that keeps this house at 1.00 is $35,361 (10.1%); a lender asking for 1.25 would need $112,591 down (32.2%) or $3,072 of rent at the current loan. On an interest-only payment the same loan shows 1.20, which is why the payment type matters when comparing offers.
Why DSCR loans exist
A mortgage to buy or improve a rental property the owner will not live in is treated as business-purpose credit under Regulation Z, even for a single house.[1] The federal ability-to-repay rule covers consumer credit secured by a dwelling,[2] so it does not apply to these loans, and lenders can qualify them on the property's cash flow instead of the borrower's income. The flip side: no federal rule sets the minimum DSCR, the documentation, the rate or the fees. Each lender sets its own.
DSCR loan vs agency investment mortgage
| DSCR loan (private) | Fannie Mae investment loan | |
|---|---|---|
| How rent is counted | Usually full rent ÷ PITIA, compared with the lender's minimum | 75% of gross monthly rent, minus PITIA[5] |
| Short-term rentals | Lender-specific | 50% of gross rent on a one-unit investment property[6] |
| Borrower's income | Often not used | Fully documented |
| Maximum loan-to-value | Lender-specific | 85% (1 unit) / 75% (2–4 units) on a purchase[7] |
Compare both when you can. An agency loan usually requires more documentation; a DSCR loan trades that for terms set entirely by the lender.
DSCR loan rates. We found no government or agency survey of DSCR loan rates. As a reference point, Freddie Mac's survey of owner-occupied 30-year fixed loans averaged 7.11% on November 12, 2026;[3] test your own quote in the worksheet, because every quarter point changes the payment and the ratio.
How to raise your DSCR before applying
A higher DSCR comes from a smaller payment or a higher rent, and the payment side is usually easier to change before closing. Each line below changes one thing in the worksheet example:
| Change | PITIA | DSCR |
|---|---|---|
| Starting point: 20% down, 7.5%, amortizing | $2,458 | 1.10 |
| Put 25% down instead of 20% | $2,335 | 1.16 |
| Lower the rate by 0.5 point (for example with points) | $2,363 | 1.14 |
| Choose an interest-only payment | $2,250 | 1.20 |
| Raise rent by $150 a month | $2,458 | 1.16 |
| Cut insurance by $300 a year | $2,433 | 1.11 |
A bigger down payment and an interest-only payment move the ratio most here. Interest-only raises the ratio without lowering what you owe, so compare the amortizing figure in the results too. Taxes and insurance count in full, so a cheaper insurance quote or a corrected tax bill helps as much as a rate cut of the same dollar amount.
What if your DSCR is below 1.00?
Below 1.00, the rent does not cover the full payment, so you would add cash every month. Policies on ratios under 1.00 differ by lender, because no federal rule sets a minimum for these loans. The worksheet shows the down payment and the rent that would bring the ratio to the minimum you enter; if neither is realistic, the property is priced above what its rent supports at today's rates.
DSCR loan requirements: questions to ask a lender
- Which rent? The signed lease, the appraiser's market rent, or the lower of the two.
- Which payment? Full PITIA, or principal and interest only; amortizing or interest-only.
- What minimum, and what happens below it? Some lenders price ratios under 1.00 differently or require more down.
- Prepayment terms and fees. Closing costs on any mortgage add up; the CFPB puts typical purchase closing costs at 2% to 5% of the price.[4]
A ratio of 1.00 is not a cushionAt exactly 1.00, one vacant month or one repair means paying from your own pocket. Rental income may not cover the mortgage and other costs.[8] The rental cash flow calculator adds vacancy, maintenance and reserves.
For apartment buildings and the agency 1.25 minimum, see the DSCR calculator; for the full payment schedule, the investment property mortgage calculator; for the whole deal, the rental property calculator.
Frequently asked questions
What is a DSCR loan?
A mortgage on an investment property that qualifies mainly on the property's rent compared with its payment, rather than on the borrower's income.
How can I improve my DSCR?
Lower the payment (more down, a lower rate, interest-only) or raise the rent; lower taxes, insurance or HOA dues also help because PITIA counts them in full. The table on this page shows each change on one example.
What DSCR do I need for a DSCR loan?
Each lender sets its own minimum; no federal rule fixes one. Enter your lender's figure in the worksheet to see the down payment or rent that meets it.
How do you calculate DSCR for a DSCR loan?
Divide monthly rent by PITIA: principal, interest, property taxes, insurance and HOA dues. $2,700 ÷ $2,458 = 1.10.
How much down payment does a DSCR loan need?
Enough that the loan's PITIA is covered by the rent at the lender's minimum ratio, and within the lender's loan-to-value limit. The worksheet shows the smallest down payment that meets the ratio you enter.
What are DSCR loan rates?
Each lender sets its own rates and fees, and no official survey tracks them. For reference, Freddie Mac's average 30-year fixed rate for owner-occupied home loans was 7.11% on November 12, 2026. Enter the rate you are offered: a higher rate raises the payment and lowers the DSCR.
Can I get a DSCR loan on an Airbnb?
Some lenders accept short-term rental income, each with its own rules for how it is documented and counted. Agency loans count only 50% of short-term rent on a one-unit investment property.
Sources
- Regulation Z § 1026.3, Exempt transactions, and Official Interpretation 3(a)
- Regulation Z § 1026.43, Minimum standards for transactions secured by a dwelling
- Primary Mortgage Market Survey (weekly averages as of November 12, 2026)
- Figure out how much you want to spend (Owning a Home)
- B3-3.8-02, Rental Income from the Subject Property (Selling Guide)
- B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (Selling Guide)
- Eligibility Matrix
- Buying an investment property