Mortgage glossary
Debt service coverage ratio (DSCR)
Definition: The debt service coverage ratio (DSCR) compares a rental property's income to its monthly housing expense, letting investors qualify for a mortgage on the property's cash flow rather than personal income.
Lenders typically divide the property's gross monthly rent, from a lease or an appraiser's rent estimate, by the full payment including principal, interest, taxes, insurance and any association dues. A ratio of 1.0 means rent exactly covers the payment. Minimum ratios and pricing vary by program.
DSCR loans are non-QM investor loans, so personal tax returns and employment verification are typically not required. Texas's relatively high property taxes raise the payment side of the calculation, so run the numbers carefully on Austin area rentals. Our non-QM lineup includes DSCR options.
Related terms
Reviewed by Kyle Richardson, NMLS #863464. General information, not advice for your specific situation. All glossary terms
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