(Guides) Updated Oct 7, 2026 · sources linked
DSCR, worked
by hand.
DSCR loans qualify the property, not the borrower's income: the rent has to cover the housing payment. The math fits on one line, but the inputs (which rent, which payment) change the answer.
(01) The formula
Rent over PITIA.
DSCR = monthly gross rent ÷ monthly PITIA (principal + interest + taxes + insurance + association dues)
At 1.00 the rent exactly covers the payment. Above 1.00 the rent covers it with room to spare; below 1.00 the borrower makes up the gap. Each lender and program sets its own minimum, and some allow ratios under 1.00 on tighter terms.
(02) Worked example
A $360,000 loan at 7.25%.
| Item | 30-year amortizing | Interest-only |
|---|---|---|
| Principal & interest | $2,455.83 | $2,175.00 (interest) |
| Taxes ($4,200/yr) | $350.00 | $350.00 |
| Insurance ($1,500/yr) | $125.00 | $125.00 |
| Payment | PITIA $2,930.83 | ITIA $2,650.00 |
| DSCR at $3,200 rent | 1.09 | 1.21 |
Lenders differ on whether an interest-only loan qualifies on the interest-only or the amortizing payment. Check which one yours uses.
(03) Solve backwards
Max loan and rent needed.
- Max loan: rent ÷ target DSCR = the most PITIA the rent supports. Take out taxes, insurance and dues, and solve the loan from the P&I that's left. At a 1.25 target: $3,200 ÷ 1.25 = $2,560; minus $475 = $2,085 P&I ≈ $305,640 at 7.25% over 30 years.
- Rent needed: PITIA × target. $2,930.83 × 1.25 ≈ $3,664 a month.
The free DSCR calculator does all of this as you type.
(04) Which rent
Lease, market rent, or the lower.
Depending on the lender and the property, the rent can come from the lease or from the appraiser's market rent estimate, and some lenders use the lower of the two. Enter the figure the lender will use, not the one the borrower hopes for.
Buying a home to live in rather than a rental? DSCR doesn't apply; a self-employed borrower qualifies with bank statement income instead.
(05) Sources
Read the lenders' own documents.
- Formula and worked figures: standard amortization math (P&I = loan × r ÷ (1 − (1 + r)−n)). Computed with the DepositDesk DSCR calculator.
Guidelines change without notice; dates are shown on each lender page. DepositDesk is independent and isn't affiliated with, endorsed by or approved by any lender named here. This guide is general information for mortgage professionals, not underwriting or legal advice.
(06) FAQ
Questions brokers ask.
How do you calculate DSCR?+
Divide the property's monthly gross rent by its monthly PITIA: principal and interest, property taxes, insurance and HOA dues. $3,200 rent ÷ $2,930.83 PITIA = 1.09.
Does interest-only change DSCR?+
Yes. On an interest-only payment the principal drops out of the denominator (ITIA), so the ratio is higher. Lenders differ on which payment they qualify on.
How do I find the max loan for a DSCR target?+
Divide rent by the target DSCR to get the most PITIA the rent supports, subtract taxes, insurance and dues, and solve for the loan amount whose principal and interest equals what's left.
(07) Keep reading
Related guides.
(Next step)
Run the numbers on a real file.
Drop in 12 or 24 months of statements and DepositDesk builds the worksheet with these rules applied, every exclusion explained. Your first file is free; statements never leave your browser.