How to Calculate DSCR | DSCR Calculator | Bayou Mortgage
DSCR Loan Guide

How to Calculate DSCR

The DSCR formula is simple: monthly rent divided by monthly PITIA. Use the calculator below to run the numbers on any property — then read through the formula, examples, and what your ratio means.

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DSCR Formula

The DSCR Formula

The Debt Service Coverage Ratio is calculated by dividing the property's monthly gross rental income by its total monthly debt service (PITIA). The result tells you how many times over the rental income covers the mortgage obligation.

DSCR Formula
DSCR = Monthly Gross Rent ÷ Monthly PITIA
PITIA = Principal + Interest + Taxes + Insurance + Association dues

What Goes Into the Numerator (Rent)

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Gross monthly rent from signed leaseThe full contractual rent before any expenses.
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Or: Appraiser's market rent estimateFor vacant properties, or when market rent is lower than actual rent.
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For STR programs: AirDNA monthly projectionOn programs that accept short-term rental income.
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Lender uses the lower of lease or market rentNot the higher — this protects against above-market leases.

What Goes Into the Denominator (PITIA)

P
PrincipalThe portion of the monthly payment reducing loan balance.
I
InterestThe interest portion of the monthly payment at your locked rate.
T
TaxesAnnual property taxes divided by 12.
I
InsuranceAnnual hazard / landlord insurance premium divided by 12.
A
Association duesMonthly HOA or condo fee if applicable. $0 for non-HOA properties.
Real Examples

DSCR Calculation Examples

Here's how the calculation works on real properties at different price points. These examples use typical Louisiana tax and insurance estimates — your actual numbers will vary.

FactorExample 1Example 2Example 3
Purchase price
$200,000
$300,000
$450,000
Down payment (25%)
$50,000
$75,000
$112,500
Loan amount
$150,000
$225,000
$337,500
Rate (8.00%)
$1,101 P&I
$1,651 P&I
$2,477 P&I
Taxes (est.)
$175/mo
$260/mo
$390/mo
Insurance (est.)
$120/mo
$175/mo
$250/mo
Total PITIA
$1,396
$2,086
$3,117
Rent needed for 1.0 DSCR
$1,396
$2,086
$3,117
Rent needed for 1.25 DSCR
$1,745
$2,608
$3,896

These are estimates. Your actual taxes and insurance will be specific to the property — use real quotes when running your final DSCR analysis.

DSCR Calculator

Calculate Your DSCR

Enter your property numbers to see your estimated DSCR ratio and whether the deal qualifies for DSCR financing. All fields use estimated figures — the appraiser's market rent and actual tax/insurance quotes determine your final ratio at underwriting.

Lease amount or estimated market rent
$
Contract price or estimated value
$
Dollar amount, not percentage
$
Current estimate — ask us for a real quote
%
Divide by 12 for monthly — or enter annual
$
Landlord / hazard insurance premium
$
Enter 0 if no HOA applies
$
0.00
DSCR Ratio
Loan Amount—
Monthly P&I—
Total Monthly PITIA—
Monthly Rent Used—
DSCR Ratio—
Get My Free DSCR Quote → 📞 Call 337-476-2623

This calculator provides an estimate only. Actual DSCR is determined by the appraiser's market rent estimate and final verified PITIA at underwriting. Bayou Mortgage — NMLS #1845349. Equal Housing Lender.

Interpreting Your DSCR

What Your DSCR Ratio Means

1.25+Strong

Excellent cash flow — best program access

Rent covers 125%+ of the payment. Most programs available. Best rates and terms. Strong buffer against vacancy or expense increases.

Best
1.10–1.24Good

Solid cash flow — full program access

Most DSCR programs available. Comfortable cushion. Standard rates and terms.

Good
1.0–1.09Qualifying

Breaks even — qualifies on most programs

Rent covers the payment with minimal margin. Qualifies on most standard programs. Factor in vacancy and maintenance reserves carefully.

Qualifying
Below 1.0Deficit

Cash flow negative — limited programs

Rent doesn't fully cover the payment. Some lenders allow 0.75–0.99 DSCR with a larger down payment (30–35%). Otherwise, the deal may not be financeable with a DSCR loan.

Challenging
Improving Your DSCR

How to Improve a Borderline DSCR Ratio

Increase the Numerator (Rent)

✓
Raise rent to market rateIf your current tenant is below market, a new lease at market rate improves DSCR.
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Add a short-term rental componentOn STR-eligible programs, Airbnb income may significantly exceed long-term market rent in the calculation.

Decrease the Denominator (PITIA)

✓
Put more downA larger down payment reduces P&I, lowering PITIA and improving DSCR.
✓
Negotiate a lower purchase priceLower price = lower loan = lower P&I = better DSCR.
✓
Buy down the ratePaying points to reduce your rate lowers P&I and improves the ratio.
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Shop insurance aggressivelyHigh insurance costs eat into DSCR — especially relevant in Louisiana. A lower insurance quote directly improves your ratio.
Quick Reference

DSCR Calculation Quick Reference

Everything you need to calculate DSCR on any rental property.

ItemDetail
Formula
Monthly Rent ÷ Monthly PITIA
Rent used
Lower of lease or appraiser's market rent
PITIA includes
Principal + Interest + Taxes + Insurance + HOA
Minimum to qualify
1.0 on most programs
Strong DSCR
1.25+ — best rate and program access
Below 1.0
Some programs at 0.75–0.99 with larger down payment
Ways to improve DSCR
More down, lower rate, higher rent, lower insurance

Bayou Mortgage — NMLS #1845349. Equal Housing Lender.

Want Us to Run the Numbers on Your Deal?

Give us the property address, purchase price, and estimated rent — we'll calculate your DSCR and identify the best program before you apply.

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Common Questions

DSCR Calculation FAQ

Does the lender use gross rent or net rent in the DSCR calculation? +
Gross rent — the full rental income before any expenses (vacancy, maintenance, management fees). DSCR lenders do not deduct operating expenses from the income side. The calculation is simply gross rent divided by PITIA.
What if my property has multiple units? +
For 2–4 unit properties, the gross rent is the combined rent from all units — the sum of current leases or the appraiser's aggregate market rent estimate. The same lower-of-lease-or-market rule applies per unit. PITIA covers the entire property.
What DSCR do I need for the best rates? +
A DSCR of 1.25 or above is generally where you'll see the best rate pricing. The difference between a 1.05 and a 1.30 DSCR can be 0.25–0.50% in rate depending on the lender. Strong DSCR signals lower risk — which translates to better pricing.
Can I use projected future rent — not current rent — in the calculation? +
Only if the appraiser's market rent estimate supports it. You can't submit your own rent projections. The appraiser independently estimates what the property would rent for, and that's the figure used. If you believe the property is significantly underrented, the appraisal process is where that gets captured.
Why is my calculator result different from what the lender uses? +
This calculator uses your inputs directly. The actual lender calculation uses the appraiser's independent market rent estimate (which may differ from actual rent), the final locked rate, and verified tax and insurance figures. Think of the calculator as a pre-qualification estimate — the appraisal determines the final DSCR at underwriting.