DSCR Loan Calculator

The property qualifies, not you

A DSCR loan is underwritten on one number: gross rent divided by the monthly housing payment. There are no tax returns, no W-2s, no pay stubs, and no debt-to-income calculation. Your personal income never enters the file, which is why these loans are the default financing for self-employed investors, for anyone whose returns show aggressive depreciation, and for property held in an LLC.

Because a single ratio carries the whole approval decision, the inputs deserve more care than they usually get. Lenders still check credit score, cash reserves — commonly three to twelve months of payments — and the appraisal, including the Form 1007 market-rent schedule that caps how much rent they will credit.

The denominator is PITIA, not P&I

This is where self-computed DSCRs go wrong. The payment in the denominator is principal, interest, taxes, insurance, and HOA dues — PITIA — plus flood insurance where it’s required. Divide rent by principal and interest alone and the ratio comes back flattering: a deal that pencils at 1.30x on P&I can land at 1.05x once the tax bill and the insurance premium are in.

Two of those lines are worth checking rather than estimating. Property tax should be the reassessed amount at your purchase price, not the seller’s decades-old basis, and landlord insurance on an investment property costs meaningfully more than the owner-occupied policy the listing might quote. The calculator itemizes all four components under the ratio so nothing gets quietly dropped.

Qualifying is not the same as cash flowing

DSCR counts the housing payment and nothing else. Property management, maintenance, a capital-expenditure reserve, owner-paid utilities, and vacancy are all absent from the formula — not because they don’t exist, but because the lender is measuring payment coverage rather than investor return.

The consequence is a trap worth naming. A property clearing 1.20x has roughly $550 of monthly headroom over PITIA on a $2,650 payment, and real operating costs on a single-family rental commonly run $700 or more once management and reserves are honest. That deal is approved and cash-flow negative at the same time. The calculator shows the lender’s ratio and your actual monthly cash flow side by side, because they answer different questions and only one of them is about whether the deal is good.

Four levers when the ratio misses

A file short of the threshold has a small, well-defined set of fixes, and they aren’t equally priced. More down payment shrinks the loan and the payment with it, at the cost of tying up cash and lowering your leveraged return. Interest-only is usually the cheapest single move — a $300,000 loan at 7.5% runs about $2,098 amortizing versus $1,875 interest-only, which is often enough on its own, though you build no equity during the IO period.

A 40-year amortization lowers the payment more modestly and permanently. And higher rent only helps to the extent the appraiser’s market-rent schedule supports it — a lease above market gets trimmed back to the 1007 figure. The “closing the gap” panel prices each of these: the rent needed for 1.00x and 1.25x, and the largest loan that clears each target with its implied LTV.

Where DSCR sits among the other metrics

DSCR measures the loan; cap rate measures the property. Cap rate deducts every operating expense and deliberately excludes financing, so two buyers bidding on the same building compute the same number. DSCR ignores operating expenses and depends entirely on your loan structure. A property has one cap rate and as many DSCRs as there are ways to finance it.

Neither tells you what your money earned — that’s cash-on-cash return, which divides actual cash flow by the cash you put in. A complete pass on a rental runs all three: cap rate to price the property, DSCR to confirm the loan closes, and cash-on-cash to see whether the result is worth doing.

Frequently asked questions