What a 1.20 DSCR Means for a Rental Loan

A 1.20 DSCR means the property brings in $1.20 of rent for every $1.00 of mortgage payment, taxes, insurance and HOA. Rent covers the full payment with 20% 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 1.20 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 1.20 DSCR: $3,945
Monthly cash flow before expenses: $656

Getting from 1.20 to 1.25

Two levers move the ratio. Rent would need to rise from $3,945 to $4,110, an extra $165 a month. Or, keeping rent where it is, the loan would need to shrink to $356,019, which is 71% LTV and a down payment of $143,981 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 1.31 without changing rent or down payment.

Rent needed for a 1.20 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 1.20
$150k	$112,500	$987	$1,185
$200k	$150,000	$1,315	$1,580
$250k	$187,500	$1,644	$1,975
$300k	$225,000	$1,973	$2,370
$350k	$262,500	$2,302	$2,765
$400k	$300,000	$2,631	$3,155
$450k	$337,500	$2,960	$3,550
$500k	$375,000	$3,289	$3,945
$550k	$412,500	$3,618	$4,340
$600k	$450,000	$3,946	$4,735
$650k	$487,500	$4,275	$5,130
$700k	$525,000	$4,604	$5,525
$750k	$562,500	$4,933	$5,920
$800k	$600,000	$5,262	$6,315
$900k	$675,000	$5,920	$7,105
$1m	$750,000	$6,577	$7,895

Check your own property at 1.20

The calculator below is set to the example above with the lender minimum at 1.20. Replace the numbers with yours.

Build the payment from price, rate, taxes and insurance

Your DSCR

1.20

Marginal

Covers the payment, but under your target. Expect a rate bump or a bigger down payment.

$3,945 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: $656.28

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 1.20: $3,946
Rent shortfall to target: $1
Max loan at 1.20 on this rent: $374,825
That is an LTV of: 75.0%
Minimum down payment: $125,175

To reach 1.20, either raise rent by $1 a month or put down $175 more.

1.20 DSCR questions

Is a 1.20 DSCR good?

It is acceptable. A 1.20 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 1.20 DSCR?

Multiply the full monthly payment (principal, interest, taxes, insurance and HOA) by 1.20. On a $500,000 property with 25% down at 7.5%, the payment is $3,289 and a 1.20 ratio needs $3,945 in rent.

Can I get a DSCR loan with a 1.20 ratio?

Yes. A 1.20 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.