What is the minimum DSCR ratio?
Standard programs require 1.0+ DSCR. No-ratio programs accept 0.0+. Best pricing typically at 1.20–1.25 DSCR.
DSCR (Debt Service Coverage Ratio) measures whether the property's rental income covers the new mortgage payment plus taxes, insurance, and HOA. DSCR = monthly rent / monthly PITIA. Most DSCR programs have a minimum: 1.0 is the conventional threshold, meaning rent equals or exceeds payment. Below 1.0 (e.g. 0.85): "low-DSCR" programs accept this at reduced LTV (typically 65-70%) and higher rate. No-ratio DSCR removes the requirement entirely, including vacant properties at close. The DSCR-to-rate relationship is roughly: DSCR 1.25+ unlocks best pricing tier; 1.0–1.20 is standard tier; 0.75–1.0 is low-DSCR tier; below 0.75 or vacant goes to no-ratio. Some programs use a debt yield calculation instead (annual NOI / loan amount), which is more common in commercial multifamily.
People also ask
How is rent calculated for DSCR purposes?
Lender uses the lower of (1) actual lease rent, (2) market rent from the 1007 appraisal addendum, or (3) for STR properties, AirDNA or T12 short-term rental income with a 20-25% expense ratio applied.
Can I include cash reserves to boost DSCR?
No. DSCR is purely property cash flow vs. payment. Reserves help with pricing tier and exceptions but do not augment DSCR mathematically.
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DSCR loans that qualify on short-term rental income. Airbnb, VRBO, and direct-booking properties. Use AirDNA projections or 12-month T12 STR statement.
No-Ratio vs Standard DSCR
No-ratio DSCR or standard DSCR? When the rent-to-payment ratio matters and when it does not. Compare LTV, rate, and qualifying scenarios.