DSCR Loan Calculation — Worked Examples

Basic concept

A common DSCR formulation compares qualifying property rent or cash flow with the housing/debt-service obligation defined by that investor.

Example

If an investor defines qualifying rent as $3,000 and qualifying PITIA/debt service as $2,500, the simple ratio is 1.20 ($3,000 ÷ $2,500).

Below 1.00

If qualifying rent is $2,250 and debt service is $2,500, the ratio is 0.90.

No universal minimum

A 1.00, 1.10, 1.20 or other threshold is not a universal DSCR mortgage rule. Investors differ on minimum ratio, rent source, expense denominator, vacancy treatment, STR treatment, LTV, credit, reserves and pricing.

Agency distinction

DSCR is a private/business-purpose investment product, not a Fannie Mae or Freddie Mac rental-income program.

Investor underwriting checklist

Identify occupancy, unit count, purchase/refinance/cash-out purpose, current ownership/title, financed-property count, current PITIA on every retained property, leases, Schedule E history, acquisition dates, reserves, entity ownership, short-term-rental use, condo/project status and the exact agency or private-investor program. Rental income should be calculated only after the property is placed in the correct underwriting category.

Where experienced analysis matters

A deal can fail because the wrong rent document was used, positive rental income was treated too generously, reserves were calculated incorrectly, an LLC mortgage was counted incorrectly, a newly acquired rental was analyzed under an older rule, or a private DSCR overlay was presented as if it were a Fannie/Freddie requirement.

Primary sources

• Fannie General Rental Income
• Fannie Subject Rental
• Fannie Short-Term Rental
• Fannie Non-Subject Rental
• Fannie Departing Residence
• Fannie Recent Rental
• Fannie Multiple Properties
• Freddie Investment Property

Last reviewed September 15, 2026. Private DSCR/portfolio guidelines vary by investor and are not agency rules.

How I would underwrite the scenario step by step

1. Identify agency conventional versus private DSCR/portfolio financing. 2. Build a complete real-estate-owned schedule with ownership, mortgage obligation, PITIA, rent, acquisition date and entity vesting. 3. Determine the permitted rental documentation for each property. 4. Calculate each rental separately under the applicable rule. 5. Count financed properties and calculate required reserves. 6. Review property/project eligibility, LTV, credit and cash-out/seasoning. 7. Only then compare pricing and decide which loan structure best fits the investor's strategy.

This sequence prevents a strong-looking property from being qualified with the wrong income methodology. For investors with several rentals, one incorrectly treated property can change DTI, reserves, financed-property count or even product eligibility.