How DSCR Is Calculated (Formula + Real Examples – 2026 Guide)
The DSCR calculation is straightforward — rent divided by payment — but the details matter. Here’s exactly how lenders run the numbers in 2026.
The Formula
DSCR = Gross Monthly Rent ÷ Monthly PITIA
Where PITIA = principal + interest + property taxes + insurance + HOA dues (if applicable).
What Counts as Rent
Lenders use the lower of the appraiser’s market rent schedule or your signed lease. If the property is vacant, the appraiser’s market rent drives the calculation. For short-term rentals on STR-eligible programs, a projected gross STR income figure (from a third-party data source) is used instead.
Step-by-Step Example
- Appraiser’s market rent: $2,400/mo
- Monthly PITIA: $2,000/mo (principal + interest + taxes + insurance)
- DSCR: $2,400 ÷ $2,000 = 1.20
A 1.20 DSCR qualifies for most programs. A 1.25+ unlocks the widest options and best terms.
How to Improve Your DSCR
- Increase rent: buy in a stronger rental market or use STR income where eligible.
- Lower the payment: larger down payment, interest-only structure, or a lower loan balance.
- Shop taxes and insurance: both are part of PITIA and affect the denominator.
What Happens Below 1.0
A sub-1.0 DSCR means rent doesn’t fully cover the payment — but you’re not automatically disqualified. No-ratio programs remove the income test entirely. Some programs approve sub-1.0 with a larger down payment. Ask your loan officer which programs apply to your scenario. More on the DSCR calculation.
