What a 1.05 DSCR Means for a Rental Loan

A 1.05 DSCR means the property brings in $1.05 of rent for every $1.00 of mortgage payment, taxes, insurance and HOA. Rent covers the full payment with 5% to spare. The loan qualifies at lenders with a 1.0 floor, but sits under the 1.25 many use for their best pricing. Expect a rate adjustment of roughly a quarter to half a point, or a lower maximum LTV, compared with a 1.25 file.

A 1.05 DSCR in real numbers

Take a $500,000 rental with 25% down, a $375,000 loan at 7.5% over 30 years, annual taxes of $5,500 and insurance of $2,500.

Principal and interest: $2,622
Taxes and insurance: $667
Total PITIA: $3,289
Rent for a 1.05 DSCR: $3,455
Monthly cash flow before expenses: $166

Getting from 1.05 to 1.25

Two levers move the ratio. Rent would need to rise from $3,455 to $4,110, an extra $655 a month. Or, keeping rent where it is, the loan would need to shrink to $299,956, which is 60% LTV and a down payment of $200,044 instead of $125,000.

An interest-only period is the third lever. On this loan it cuts the payment by $278 a month and lifts the ratio to 1.15 without changing rent or down payment.

Rent needed for a 1.05 DSCR at other price points

Same assumptions, different purchase prices. Taxes are set at 1.1% of price and insurance at 0.5%, so adjust for your market.

Price	Loan (75% LTV)	PITIA	Rent for 1.05
$150k	$112,500	$987	$1,035
$200k	$150,000	$1,315	$1,380
$250k	$187,500	$1,644	$1,725
$300k	$225,000	$1,973	$2,070
$350k	$262,500	$2,302	$2,415
$400k	$300,000	$2,631	$2,765
$450k	$337,500	$2,960	$3,110
$500k	$375,000	$3,289	$3,455
$550k	$412,500	$3,618	$3,800
$600k	$450,000	$3,946	$4,145
$650k	$487,500	$4,275	$4,490
$700k	$525,000	$4,604	$4,835
$750k	$562,500	$4,933	$5,180
$800k	$600,000	$5,262	$5,525
$900k	$675,000	$5,920	$6,215
$1m	$750,000	$6,577	$6,905

Check your own property at 1.05

The calculator below is set to the example above with the lender minimum at 1.05. Replace the numbers with yours.

Build the payment from price, rate, taxes and insurance

Your DSCR

1.05

Qualifies

Qualifies at your target ratio.

$3,455 rent / $3,289 PITIA

Monthly payment (PITIA)

Principal and interest: $2,622.05
Property taxes: $458.33
Insurance: $208.33
Total PITIA: $3,288.72
Monthly cash flow: $166.28

Loan amount $375,000 at 75% LTV. Cash flow here is before vacancy, repairs and management.

What it takes to qualify

Rent needed for 1.00: $3,289
Rent needed for 1.05: $3,453
Rent cushion above target: $2
Max loan at 1.05 on this rent: $375,251
That is an LTV of: 75.1%
Minimum down payment: $124,749

1.05 DSCR questions

Is a 1.05 DSCR good?

It is acceptable. A 1.05 DSCR clears the 1.0 floor most lenders require, so the loan can close. It is below the 1.25 that unlocks the best pricing, so expect a slightly higher rate or a lower maximum loan-to-value.

What rent do I need for a 1.05 DSCR?

Multiply the full monthly payment (principal, interest, taxes, insurance and HOA) by 1.05. On a $500,000 property with 25% down at 7.5%, the payment is $3,289 and a 1.05 ratio needs $3,455 in rent.

Can I get a DSCR loan with a 1.05 ratio?

Yes. A 1.05 ratio meets the 1.0 minimum at most DSCR lenders. You may see a rate adjustment or a lower LTV cap compared with a 1.25 file.