How DSCR loans are sized
Lender DSCR = gross monthly rent ÷ PITIA
PITIA is the monthly principal and interest plus property tax, insurance and HOA dues. A DSCR of 1.25 means the rent is 25% higher than the housing payment. DSCR loans qualify an investment property mainly on its rent rather than on your personal income, which is why they are popular with self-employed investors and people who own several rentals.
What ratio do lenders want?
Requirements vary by lender and program. Many look for a ratio of at least 1.0 to 1.25; some accept lower ratios with a larger down payment or a higher rate. Credit score, reserves and loan-to-value also affect the rate and approval.
Maximum loan and minimum rent
The calculator solves the loan amount at which rent divided by PITIA equals your target, and the rent needed to reach the target with your current loan. If the maximum loan is below the loan you need, a larger down payment, a lower price or a higher rent is required.
Using it as a DSCR refinance calculator
The same ratio decides a refinance. Enter the property's current value as the purchase price and set the down payment to 100% minus the lender's maximum loan-to-value: for a 75% LTV cash-out refinance, enter 25%. Use the rate quoted for the new loan and the current market rent.
The maximum loan shows how much the rent supports at the lender's target ratio. If it is lower than value × LTV, the DSCR, not the appraisal, limits how much cash you can take out. To see the cash you would receive after paying off the current loan and closing costs, use the cash-out refinance calculator.
DSCR refinance example
If market rent is $2,500 a month and the lender requires 1.25× DSCR, the maximum PITIA supported by rent is $2,000 a month ($2,500 ÷ 1.25). The calculator then subtracts taxes, insurance and HOA before solving how much principal and interest—and therefore how much new loan—the property can support. Compare that result with the lender's loan-to-value cap; the lower limit controls.
Lender DSCR vs. our rental model
This lender-style ratio uses gross rent. The DSCR in our rental property calculator uses net operating income, which subtracts vacancy and operating costs, so it is always more conservative. Use both: one tells you whether a lender may approve the loan; the other tells you whether the property pays for itself.