The short answer: There is no single required DSCR ratio — minimums vary by investor and program. Many programs look for a ratio near or above 1.0, meaning the monthly rent covers the full mortgage payment (PITI). Ratios above 1.0 show surplus cash flow. Below-1.0 ratios are sometimes possible with compensating factors such as a larger down payment or strong reserves.
How the ratio is measured
- The formula: monthly rental income ÷ monthly PITI payment (principal, interest, taxes, insurance).
- Income source: lenders generally use the lower of the appraiser's market rent (rent schedule on Form 1007/1025) or the actual rent on an existing lease.
- Vacant properties: the appraiser's market-rent opinion stands in — your rent projections don't count.
- Payment side: the full PITI payment, not just principal and interest. Taxes and insurance count.
A worked example
Illustrative example — not a quote or commitment to lend.
A duplex rents for $2,500 per month on the appraisal's rent schedule. The proposed PITI payment is $2,083 per month.
DSCR = $2,500 ÷ $2,083 ≈ 1.20. Rent covers the payment with room to spare. Contrast a second scenario: the same duplex at $2,000 rent with the same payment gives a 0.96 ratio — negative cash flow on paper. Some programs can still work at that level with compensating factors such as a larger down payment or sizable reserves; others cannot.
What the numbers mean
| Ratio | What it means arithmetically |
|---|---|
| Above 1.0 | Rent exceeds the payment — surplus cash flow |
| Exactly 1.0 | Rent exactly covers the payment — break-even |
| Below 1.0 | Rent falls short of the payment — negative cash flow |
These are math, not program minimums — each investor sets its own floor, and some no-ratio programs skip the ratio test entirely.
Important exceptions
- No-ratio programs exist. Some Non-QM programs qualify the property without a DSCR test at all — typically with larger down payments or other trade-offs.
- 5–8 unit properties play by different rules. Larger multifamily DSCR has its own guideline set; see our 5–8 unit DSCR program page.
- Short-term rentals may be measured differently. Some investors use actual STR revenue history; others fall back to long-term market rent.
- Guidelines change. Minimums, reserve rules, and eligible property types are updated regularly by investors.
Authoritative sources
Related NonQM Rates resources
- DSCR ratio calculator — run your own numbers
- DSCR Investor Loans — program details
- No-Ratio Loans
- 5–8 Unit DSCR
- Q&A: Can I get a DSCR loan with no tax returns?
Wondering if a DSCR loan fits your deal?
Check My Eligibility or call 949-241-9489
Please note: Guidelines vary by investor and are subject to change. Educational content only — not loan advice.
