DSCR loans
How Much Rent Do You Need to Qualify for a DSCR Loan?
The rent you need is whatever makes the property cover its full payment. Here are three worked examples showing the exact figure at different price points.
The question behind every DSCR deal is simple: does the rent cover the payment, and by how much. The rent you need is whatever makes the debt service coverage ratio clear the lender's floor. Here is exactly what that looks like in dollars.
The rule
For a ratio of 1.0, the rent must at least equal the full monthly payment, the principal, interest, taxes, insurance, and any dues, often shortened to PITIA. For the 1.25 ratio that earns the best pricing, the rent must be about 25 percent above that payment. So the rent you need is the full payment times the ratio you are aiming for.
Three worked examples
A 200,000 dollar property. With 25 percent down at an illustrative 7.5 percent over 30 years, the loan is 150,000 and principal and interest run about 1,049. Add roughly 250 in taxes and 110 in insurance, and the full payment is about 1,409. You need about 1,409 in rent to clear 1.0, and about 1,761 to clear 1.25.
A 300,000 dollar property. The loan is 225,000, principal and interest about 1,573, plus say 330 taxes and 140 insurance, for a payment near 2,043. You need about 2,043 in rent for 1.0, and about 2,554 for 1.25.
A 150,000 dollar property. The loan is 112,500, principal and interest about 787, plus say 180 taxes and 95 insurance, for a payment near 1,062. You need about 1,062 in rent for 1.0, and about 1,328 for 1.25. This is why low-price, strong-rent markets clear the ratio so easily.
Run your own numbers
Those figures shift with the rate, the taxes, and the insurance, which is why you should run your actual property rather than rely on a rule of thumb. The DSCR calculator does it instantly with the full payment, exactly as a lender would, and the how to calculate DSCR guide shows the math step by step.