DSCR — Debt Service Coverage Ratio
DSCR (Debt Service Coverage Ratio) measures how many times a property's NOI covers its mortgage payments — the primary qualification metric for DSCR investment loans.
DSCR = NOI ÷ Annual Debt Service. A DSCR of 1.0 means the property's income exactly covers its mortgage payments. A DSCR of 1.25 means income is 25% above what's needed to cover debt. Most DSCR lenders require a minimum of 1.0–1.25.
DSCR loans are a game-changer for STR investors because they qualify based on the property's income, not your personal W-2 income. Self-employed investors, business owners, and high-net-worth individuals with complex tax situations can access investment financing without income verification or debt-to-income ratio constraints.
For STR properties, lenders typically calculate the projected rental income using market data (often from AirDNA or similar platforms), not just the actual lease. This makes DSCR loans particularly useful for new STR acquisitions where there's no income history.
DSCR loan rates are typically 0.5–1.5% higher than conventional owner-occupied loans. Down payments are usually 20–25%. Despite higher costs, DSCR loans are often the only viable path for STR investors who don't qualify for conventional financing.
Formula
DSCR = NOI ÷ Annual Debt ServiceCalculate It
Quick Calculator
DSCR = NOI ÷ Annual Debt Service
DSCR
1.18x
Worked Example
A property generates $45,000 NOI with annual mortgage payments of $36,000. DSCR = $45,000 ÷ $36,000 = 1.25x — strong DSCR that most lenders accept.
Related Terms
Related Calculators
Frequently Asked Questions
What DSCR do I need to qualify for a loan?+
Most DSCR lenders require a minimum of 1.0–1.25. Some lenders will go down to 0.75–0.90 for strong borrowers with significant assets, but rates will be higher. The sweet spot is 1.25+, which qualifies at the best terms from most lenders. A DSCR below 1.0 means the property doesn't cover its own debt — most lenders won't fund this.
How is STR income calculated for DSCR loans?+
STR income for DSCR loans is typically calculated using 75% of the projected market rent shown by an appraisal (using STR comparable data) or a market analysis from a data provider like AirDNA. Lenders are becoming more sophisticated in underwriting STR income — always disclose that it's a short-term rental and work with an STR-experienced lender.
Are DSCR loans more expensive than conventional loans?+
Yes — DSCR loans typically have rates 0.5–1.5% higher than conventional owner-occupied loans, and require 20–25% down payment. However, the qualifying criteria are much more flexible, making them accessible to investors who can't use conventional financing.
Can I get a DSCR loan for a new STR with no rental history?+
Yes — DSCR lenders underwrite to projected income based on market data, not actual historical performance. You'll need an appraisal that includes an STR market analysis, or data from platforms like AirDNA to support the projected income. Lenders typically apply a vacancy factor (25–30%) to the projected gross income.
What is the difference between DSCR and DTI?+
DTI (Debt-to-Income ratio) is a personal income metric used for conventional loans — it measures your total debt payments as a percentage of your personal gross income. DSCR is a property-level metric that measures the property's income vs its own debt payments. DSCR loans don't use DTI at all — they qualify purely on the property's income performance.