DSCR Loan Calculation Calculator: A Step-by-Step Guide for Real Estate Investors

What Is DSCR and Why It Matters for Loan Approval

Definition of DSCR (Debt-Service Coverage Ratio)

DSCR = Net Operating Income / Total Debt Service

How DSCR Impacts Loan Eligibility

Lenders prefer DSCR > 1.10. Higher is better.

DSCR vs DTI

DSCR focuses on property income, not personal income.

The DSCR Loan Formula Explained

DSCR = Net Operating Income / Debt Service

NOI = Rental income − operating expenses

Debt Service = Principal + Interest payments

How to Calculate DSCR for a Rental Property

1. Calculate Monthly/Annual NOI
2. Identify Total Loan Payments
3. Apply DSCR formula: DSCR = NOI / Annual Loan Payments

Example

NOI = $66,000/year, Loan = $54,000/year → DSCR = 1.22

What Is a Good DSCR for a Loan?

Most lenders want 1.10 or higher. 1.25+ is ideal.

• 1.25+ = Strong
• 1.10–1.24 = Acceptable
• 1.00–1.09 = Risky
• <1.00 = Very Risky

DSCR Calculation Mistakes to Avoid

• Don’t use gross rent
• Include vacancy/maintenance
• Use accurate loan payment structure (IO vs amortized)

Tools and Tips to Help You Calculate DSCR Accurately

• Use online calculators or Excel
• Project future rents conservatively
• Work with a mortgage broker for best results