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Effective Vacancy Rate
Loan to Value Ratio
Two-Input Ratio Debt Metrics Most Popular Loan & Mortgage Risk Assessment

Debt Service Coverage Ratio

Net Operating Income divided by annual debt service — measures ability to cover mortgage.

Example Result

Sample Data
0.84x

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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Debt Service Coverage Ratio Formula

Net Operating Income / Annual Debt Service
$20,566 / $24,590
0.84x

What This Means

A sample property priced at $385,000 with $2,850/month rent has a debt service coverage ratio of 0.84x at Purchase (Month 0). DSCR is the metric lenders care about most. Most commercial lenders require a minimum 1.20-1.25x DSCR. Below 1.0x means the property cannot cover its debt from operations. Higher DSCR means more safety margin.

Where This Value Comes From

Debt Service Coverage Ratio is not entered directly — it is calculated from Net Operating Income and Debt Service. See the formula breakdown above and the detailed inputs below.

Inputs That Determine Debt Service Coverage Ratio

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Why It Matters

DSCR is the metric lenders care about most. Most commercial lenders require a minimum 1.20-1.25x DSCR. Below 1.0x means the property cannot cover its debt from operations. Higher DSCR means more safety margin.

Detailed Explanation

The Debt Service Coverage Ratio (DSCR) measures how comfortably a property's net operating income covers the annual mortgage payment. A DSCR of 1.25x means net operating income is 25% greater than the annual debt service.

How Lenders Use DSCR

DSCR is one of the primary metrics lenders use to determine whether you qualify for a loan. Before approving financing, most lenders calculate DSCR to verify the property can service its own debt from operations — not just from your personal income.

Below 1.0x
Property cannot cover its debt — most lenders will not approve the loan
1.0x – 1.20x
Marginal — covers debt but little cushion; many lenders will decline
1.25x and above
Meets most lender minimums — 1.25x is the standard commercial threshold

For DSCR loans (also called investor cash flow loans), the lender qualifies the property itself rather than your personal debt-to-income ratio. This makes DSCR especially important for investors who have maxed out conventional financing or are self-employed — the property's income is what gets you the loan.

Example

Sample Result
1.23x

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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