Short answer: It varies by lender. Lender guides commonly describe minimums around 1.0 to 1.25, with 1.25 or higher typically getting better terms.
What DSCR means
DSCR (debt service coverage ratio) asks one question: does the property's income cover its loan payment? A DSCR of 1.0 means it just covers it; above 1.0 there's a cushion.
Two versions you'll see
Lender DSCR for rental loans is commonly gross monthly rent divided by the full housing payment (principal, interest, taxes, insurance and HOA, often called PITIA).
Lender DSCR = rent ÷ PITIAFirstDoor's DSCR is more conservative: net operating income (after vacancy, maintenance and management) divided by principal and interest. It tells you whether the deal survives real-world costs, not just whether a lender will approve it.
FirstDoor DSCR = NOI ÷ P&IWhat ratios lenders look for
Requirements vary by lender and program. Dominion Financial describes most DSCR lenders as requiring a minimum of roughly 1.0 to 1.25, with 1.25 and above getting the best terms. DSCR Authority describes 1.00 as the standard minimum at most mainstream lenders and 1.25 as the preferred tier, with some sub-1.0 programs at lower loan-to-value and higher rates.
Good to know: DSCR loans qualify you mainly on the property's rent rather than your personal income, but they often cost more than conventional loans and may need a bigger down payment. Compare offers carefully.
How to raise your DSCR
Pay less, put more down, find a lower rate, or confirm higher market rent with real comps. Each one lowers the payment or raises income.
Red flag: A deal that barely clears a lender's 1.0 but goes negative once you budget vacancy and repairs. Approval isn't the same as a good investment.
Worked example
A $240,000 rental at $2,200/mo, 25% down at 7.5% for 30 years, $3,000/yr tax, $1,500/yr insurance.
| Principal & interest | $1,259 |
| Taxes + insurance | $375 |
| PITIA | $1,634 |
| NOI (after vacancy, repairs, mgmt) | $1,429 |
Frequently asked questions
What is a good DSCR for a rental property loan?
It varies by lender. Lender guides commonly describe minimums around 1.0 to 1.25, with 1.25 or higher typically getting better terms.
How do lenders calculate DSCR on a rental?
For DSCR rental loans it is commonly gross monthly rent divided by principal, interest, taxes, insurance and HOA (PITIA). Check your lender's exact method.
Why is FirstDoor's DSCR lower than my lender's?
FirstDoor subtracts vacancy, maintenance and management before dividing by the loan payment, which is more conservative than a gross-rent calculation.
Keep learning
- What is a good cap rate?
- How much cash do you need for your first rental?
- Cash-on-cash return, explained
- How to analyze a rental property (step by step)
- Rental analysis glossary
Sources
Educational content, not financial advice. Loan programs and requirements change; confirm with a lender.