DSCR Calculation Explained

Concept

A ratio above 1.00 generally means the income measure exceeds the debt-expense measure; below 1.00 means it does not.

Rent source

Lease rent, appraisal market rent, operating history and short-term-rental data may be treated differently across investors.

Expense definition

Taxes, insurance, association dues and mortgage payment components can be handled differently depending on the product matrix.

Never quote a universal minimum

The minimum DSCR, allowable no-ratio structure, LTV and pricing are investor/product-specific.

Always define numerator and denominator

A ratio is meaningless until you know what the investor accepts as rent/income and what it includes as debt service. Two DSCR lenders can calculate the same property differently.

Documents I would gather before calculating rental income

Current mortgage statements/PITIA for every retained property; Schedule E and applicable tax returns; leases; purchase closing statements and acquisition dates; appraisals or rent schedules when applicable; proof of current housing payments; insurance/HOA information; entity documents if an LLC is involved; and evidence of reserves. The correct calculation depends on what the property is and when/how it was acquired.

Common investor-loan mistakes

Calling 75% of rent 'income' without subtracting PITIA; using a lease when current agency policy requires another rent source; adding positive rental income when it is only allowed to offset housing expense; confusing cap rate with DSCR; applying a private investor's seasoning rule to Fannie/Freddie; and assuming an LLC-owned mortgage is counted the same as a personally obligated mortgage.

Primary sources to verify

• Fannie Mae — General Rental Income
• Fannie Mae — Investment Property Purchased Within 45 Days
• Fannie Mae — Multiple Financed Properties
• Freddie Mac — Investment Property Mortgages

Last reviewed September 15, 2026.