How lenders measure it
A DSCR loan qualifies on the property's rent instead of your personal income. Lenders for one- to four-unit rentals usually divide the monthly gross rent by PITIA: principal, interest, property taxes, insurance, and association dues.
Take a $300,000 single-family rental bought with 25% down, a $225,000 30-year loan at 6.875%, $3,000 a year of property tax, and $1,800 of insurance. The PITIA is $1,878 a month. Rented at $2,400, the ratio is $2,400 ÷ $1,878 = 1.28.
Minimums by situation
DSCR loans fall outside Fannie Mae's and Freddie Mac's standard programs, so each lender writes its own rules. Two published programs show the pattern: a 1.00 floor for a standard deal, and more coverage, or less leverage, as the risk rises.
| Situation | Minimum DSCR | Where it comes from |
|---|---|---|
| Standard purchase or refinance | 1.00 | “Most lenders require a minimum DSCR of 1.0” (Defy Mortgage) |
| Best terms | 1.25 or higher | Qualifies at best terms at most lenders (Defy Mortgage) |
| First-time homebuyer | 1.15, with at most 70% loan-to-value | Acra Lending |
| Borrowing more than 80% of the value | 1.20, with 6 months of reserves | Acra Lending |
| Cash-out refinance of a vacant property | 1.15 | Acra Lending |
| Below 1.00, or no ratio | Allowed, at up to 75% loan-to-value on a purchase and a 640 credit score | Acra Lending; Defy Mortgage lends down to 0.75 |
These are two lenders' published terms, not an industry rule. Others differ, and terms change often.
The rent each minimum needs
On the same $300,000 rental, here is the rent each common minimum requires, and the largest loan today's $2,400 rent would support at that minimum:
| Minimum DSCR | Rent needed | Largest loan at $2,400 rent | This rental |
|---|---|---|---|
| 1.00 | $1,878 | $304,447 | Clears it |
| 1.10 | $2,066 | $271,235 | Clears it |
| 1.20 | $2,254 | $243,558 | Clears it |
| 1.25 | $2,348 | $231,380 | Clears it |
| 1.50 | $2,817 | $182,668 | Falls short |
The ratio is only one limit. Lenders also cap the loan at a share of the value, set by your credit score and the deal, so a high ratio doesn't mean you can borrow the largest loan in the table.
Test your own rental in the DSCR Calculator
If your ratio comes up short
- Put more down. At 6.875%, the ratio on this rental moves with the down payment: 1.21 at 20% down, 1.28 at 25% down, 1.35 at 30% down, 1.43 at 35% down, and 1.52 at 40% down.
- Ask about interest-only. Some DSCR programs, Acra Lending's among them, offer interest-only payments for the first five or ten years. Paying interest only, this rental's ratio rises from 1.28 to 1.42, though the balance doesn't fall during that time.
- Buy the rate down. Half a point lower, at 6.375%, the ratio is 1.33.
- Check the rent the lender will use. Lenders confirm the rent, typically from the lease or the appraiser's market-rent estimate, so a below-market lease can sink an otherwise good deal.
Passing isn't profit
The lender's ratio ignores vacancy, repairs, and management. Allowing 5% for vacancy and 15% of rent for upkeep and management, this rental keeps about $42 a month after the mortgage, even with a ratio of 1.28. Run the cash flow before you treat a passing ratio as a good investment.
Questions
- Is 1.25 a good DSCR?
- For a lender, yes: it's the level where most lenders offer their best terms, and it means the rent is 25% above the full payment. It doesn't guarantee cash flow, because the ratio leaves out vacancy, repairs, and management.
- Can I get a DSCR loan below 1.0?
- Some lenders allow it with less leverage. Acra Lending's October 2026 program allows below-1.0 and no-ratio loans at up to 75% of the value on a purchase with a 640 minimum credit score, and Defy Mortgage lends down to 0.75. Expect to put more down.
- Do DSCR lenders look at my income?
- The property's rent replaces your income as the main test. Lenders still check your credit score, your cash reserves, and the property itself, and they set loan-to-value limits by score.
Sources
- 2026 DSCR Loan Requirements, Defy Mortgage, updated July 2026.
- DSCR Program Summary (investment property), Acra Lending, effective October 2, 2026.
Worked figures come from Keystone's calculators at today's default inputs, so they match the tools. They're educational estimates, not financial, tax, or lending advice. How we source and check them: editorial policy.