Debt-service coverage ratio compares the income used for qualification with the housing payment used for that calculation. The applicable lender defines the accepted numerator and denominator.
A simple preliminary calculation #
For an illustrative rental-income-to-housing-payment calculation: DSCR = monthly qualifying rental income ÷ monthly housing payment. If income is $4,000 and the payment is $3,200, the ratio is 1.25. Confirm whether the payment includes principal, interest, taxes, insurance, and association dues.
DSCR is different from cash flow #
A qualification ratio may not deduct all operating expenses. Management, utilities, repairs, vacancy, reserves, and furnishings can materially affect investor cash flow even when the estimated ratio meets a program threshold.
What the estimate means #
Do not assume a universal minimum ratio or universal income treatment. A lender may use appraiser-supported rent, documented rental history, or other permitted evidence. Credit, leverage, property, ownership, and state eligibility also matter.
Related help #
Analyze a Property · Contact STR Advisory
Property and financing outputs are preliminary estimates, not an approval, rate lock, commitment, or guarantee. Eligibility and final terms require professional review and lender underwriting.
