What DSCR Measures
Debt Service Coverage Ratio = NOI ÷ debt service. A DSCR of 1.0 means the property breaks even on debt; 1.2+ is typically required. Lenders use the appraised rent (1007 form), not your W-2.
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When to Use DSCR
When you have many financed properties (past Fannie/Freddie's 10-property cap), when you're self-employed, or when you want to close in an LLC without personal guarantees on income.
The Real Costs
DSCR rates run 50–150bps above conventional, with 20–25% down and prepayment penalties (typically 3-5 year step-down). Always model the prepay if you might refinance.