Home / Glossary / DSCR (Debt Service Coverage Ratio)
DSCR (Debt Service Coverage Ratio)
A ratio that measures whether a property's rental income covers its debt payments.
Definition
The Debt Service Coverage Ratio divides a property's net operating income by its total debt service (principal, interest, taxes, insurance, and association dues). A DSCR of 1.0 means the property exactly breaks even, while a ratio above 1.0 indicates positive cash flow. Most DSCR lenders require a minimum ratio between 0.75 and 1.25, depending on other loan characteristics. Unlike conventional mortgages, DSCR loans qualify the property rather than the borrower's personal income, making them popular with real estate investors. The higher the DSCR, the less risk the lender takes on, which typically results in better pricing.
How This Relates to DSCR Loans
DSCR is the central metric in DSCR lending. Your ratio directly determines your eligibility, rate, and pricing adjustments.
Related Terms
NOI (Net Operating Income)
A property's total income minus operating expenses, before debt service and taxes.
PITIA
The total monthly housing payment: Principal, Interest, Taxes, Insurance, and Association dues.
Cash Flow
The net money remaining after all income is collected and all expenses and debt payments are made.
Non-QM (Non-Qualified Mortgage)
A mortgage that doesn't meet the Consumer Financial Protection Bureau's qualified mortgage standards.
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