How the DSCR Calculator Works

One calculation engine produces every number on this site, from the homepage calculator to the tables on the ratio and price pages. This page documents what it does so you can check it.

The ratio

DSCR = monthly gross rent / PITIA
PITIA = principal and interest + taxes / 12 + insurance / 12 + monthly HOA

This is the residential DSCR lender convention. It uses gross scheduled rent and does not deduct vacancy, management, maintenance or reserves. Commercial DSCR, which divides net operating income by annual debt service, is a different measure and is not what this site calculates.

Principal and interest

payment = L × r × (1 + r)^n / ((1 + r)^n − 1)
L = loan amount, r = annual rate / 12, n = term in months

Interest-only payments are simply L × r. A zero rate falls back to L / n.

Max loan at a target ratio

The calculator solves the ratio backwards for the largest loan the rent supports:

max PITIA = rent / target DSCR
max P&I  = max PITIA − taxes/12 − insurance/12 − HOA
max loan  = max P&I / payment factor
payment factor = payment on $1 at the same rate and term

The implied LTV is max loan divided by price, and the minimum down payment is price minus max loan.

Rating bands

Strong: at or above 1.25 (and at or above the target you set)
Qualifies: at or above your target but under 1.25
Marginal: at or above 1.0 but under your target
Below: under 1.0, rent does not cover the payment

The bands describe common lender behavior. Individual lenders set their own thresholds, and pricing between 1.0 and 1.25 varies.

Assumptions on the ratio and price pages

The programmatic tables use one fixed set of assumptions so they compare like with like:

Down payment: 25%
Interest rate: 7.5%, 30-year fixed, fully amortizing unless a column says interest-only
Property taxes: 1.1% of purchase price per year
Insurance: 0.5% of purchase price per year
HOA: none
"Typical rent" on price pages: 0.8% of price per month

Taxes and insurance vary widely by state and by property. The homepage calculator lets you replace all of these with real quotes, which you should do before relying on the result.

Rounding

Rents in tables are rounded to the nearest $5 and dollar figures to the nearest dollar for display. Ratios are computed from unrounded values and shown to two decimals, so a displayed rent may reproduce a ratio that differs by 0.01.