Mortgage Navigator • Non-QM Underwriting

DSCR Calculation

DSCR sounds like one formula, but the definition of both income and housing expense can vary by investor.

Core concept

At its simplest, DSCR compares program-eligible property income with the program-defined monthly housing or debt-service obligation. A result above 1.00 generally means the measured income exceeds the measured obligation; below 1.00 means it does not. That does not establish any universal approval threshold.

What can change the result

Market rent vs lease rent, short-term-rental treatment, vacancy, PITIA components, HOA dues, interest-only payments and other items may be treated differently by different investors.

Investor matrix, not a universal Non-QM rule. Bank-statement calculations, expense factors, DSCR formulas, asset haircuts, credit-event seasoning, LTV, reserves and documentation can vary materially by investor and lender. MortgageDadOf3 separates the concept from the actual program matrix so a lender overlay is not mistaken for an industry-wide rule.

Consumer-purpose loans still require the applicable consumer-protection analysis. For covered transactions, Regulation Z’s Ability-to-Repay framework generally requires a reasonable, good-faith determination of repayment ability. Alternative documentation is not the same thing as “no documentation.”

Consumer-protection references

CFPB / Regulation Z §1026.43 Ability-to-Repay · CFPB Qualified Mortgage explanation · IRS IVES transcript information