What can we help you with?

Amres has helped thousands of people get the financing they need.
Buying a home
HELOC
Refinancing
User ratingUser ratingUser ratingUser ratingUser rating
5-star rating
4.9
from 500+ reviews on Zillow
A graphic of a blue circle.
A 3d rendering of a blue home.

Someone from our team will reach out to you shortly. In the meantime, you can get started filling out your application so you can hit the ground running!
Get started now
Oops! Something went wrong while submitting the form.
We care about your data in our privacy policy.
All posts

How to Calculate Debt Service Coverage Ratio (DSCR)

Loan Types
Mortgage 101
To find out about your DSCR, you'll need to know how much you pay for housing expenses, including principal, interest and insurance. Read more to find out!
Published on
July 16, 2024
Copy link
Introduction

Debt to Coverage Service Ratio (DSCR) is a tool that lenders use to determine whether or not your income and debt are sufficient for the loan you are requesting. The DSCR is calculated as a ratio of your housing expenses (including principal, interest, taxes, insurance and HOA dues) divided by your gross monthly income.

What is the Debt to Coverage Service Ratio (DSCR) and how is it used?

The debt-to-coverage service ratio (DSCR) is a predictive measure of the ability of a property to generate enough revenue to cover costs of property management, debt servicing and repaying loans.

It can also be calculated by dividing the amount owed on your mortgage by the net operating income (NOI) you receive from your rental property.

Unique guidelines for Debt to Coverage Service Ratio (DSCR) home loans

One of the unique guidelines for debt to coverage service ratio (DSCR) home loans is that they are available only to non-QM customers.

For this reason, you may need to refinance your current mortgage in order to take advantage of a DSCR mortgage loan.

How to calculate Debt to Coverage Service Ratio (DSCR)

The Debt Service Coverage Ratio (DSCR) is a critical loan parameter that lenders use to determine the borrower’s ability to repay. It's calculated by dividing the total monthly debt service by the total monthly income. This ratio allows lenders to ensure that they are making loans with no more than 1.5 times annual gross income required for payments and taxes, insurance, and other recurring costs of owning a home. There is no maximum DTI ratio for DSCR home loans.

While some mortgage programs require borrowers who have DSCR requirements of FICO scores above 640, or payment history with at least one 30-day delinquency in the past 24 months; others do not have any minimum requirements at all when it comes down whether or not you qualify for such financial products.

What is a good DSCR?

DSCR is a measure of the ability of a borrower to repay their loan.

It's calculated by dividing the loan amount by annual housing expense. DSCR should be greater than 1.0

DSCR home loans are a type of non-QM.
  • A DSCR home loan is a type of non-QM loan.
  • A DSCR home loan is not eligible for Fannie Mae or Freddie Mac guarantees.
  • A DSCR home loan has a Debt-to-Coverage Service Ratio (DSCR) requirement, which must be met in order to qualify for the mortgage financing.
Conclusion

We hope this guide has helped you better understand how to calculate Debt to Coverage Service Ratio. If you have any questions about the topic contact us today!

‍

Get started today
Whether you're actively looking, or just researching, you can find out what you qualify for and get connected with a pro.
Apply Now
Questions? We have answers.
Tap into expert mortgage advice with just a click! Our specialists are prepared to simplify mortgages, answer your questions, and tailor the perfect financing solution for you.
Talk with a pro
Latest posts

Don't Stop Here

Check out some of these related articles.

Understanding Mortgage Points and Their Impact on Rates: A Comprehensive Guide

Understanding Mortgage Points and Their Impact on Rates: A Comprehensive Guide. This blog post provides a detailed explanation of mortgage points and their importance in the mortgage process. It covers the definition of mortgage points, different types of points, and how they work. It also explores the impact of mortgage points on interest rates and discusses the pros and cons of buying points. Additionally, it offers guidance on when to consider buying points and provides a step-by-step guide on how to calculate whether mortgage points are worth it. Gain a comprehensive understanding of mortgage points and their impact on rates with this informative guide.
Read post

Full Doc Loans vs Other Financing Options: Making an Informed Choice

Looking for the right financing option for your mortgage? This blog post compares Full Doc Loans with other alternatives such as No Doc Loans, Low Doc Loans, and Stated Income Loans. Understand the requirements, benefits, and potential drawbacks of each option to make an informed choice. Explore real-life case studies and learn valuable tips on choosing the right loan type based on your individual circumstances. Don't miss out on this comprehensive guide to finding the perfect mortgage financing solution for you.
Read post

The Pros and Cons of Putting More Money Down on Your Mortgage: A Comprehensive Guide

Learn about the pros and cons of putting more money down on your mortgage in this comprehensive guide. Discover how a higher down payment can lead to lower monthly payments, less interest paid over the life of the loan, increased equity in your home, and potentially avoiding mortgage insurance. However, be aware of the cons, such as tying up a large amount of money in a single asset, the potential for better returns elsewhere, the risk of home value depreciation, and difficulty accessing the money in case of a financial emergency. Explore real-life case studies comparing different down payment amounts and their impacts on mortgage payments and total interest paid. Consider factors like your personal financial situation and goals when deciding how much to put down. Make an informed decision that aligns with your needs and aspirations.
Read post
Go to the Learning Center