DSCR worksheet for a first rental: run the ratio before you offer
By Francisco Williams, CCIM · CCIM · Mortgage Loan Originator NMLS #1858674 · CA DRE #01979442 · Updated
Short answer
On most residential DSCR programs the ratio is the property's monthly rent divided by its full monthly housing payment: principal, interest, taxes, insurance and any HOA dues (PITIA). A ratio of 1.00 means rent exactly covers the payment. Each program sets its own minimum and decides which rent figure counts.
The formula
DSCR = qualifying monthly rent ÷ monthly PITIA. Illustrative only: $3,300 rent ÷ $3,000 PITIA = 1.10.
Which rent counts
For a purchase, usually the appraiser's market rent schedule. For a leased property, often the lease or the market rent, whichever the program allows (sometimes the lower).
| Input | A: base | B: higher insurance | C: larger down payment |
|---|---|---|---|
| Market rent (appraiser) | $3,300 | $3,300 | $3,300 |
| Principal & interest | $2,300 | $2,300 | $2,000 |
| Taxes | $450 | $450 | $450 |
| Insurance | $150 | $300 | $150 |
| HOA | $100 | $100 | $100 |
| PITIA | $3,000 | $3,150 | $2,700 |
| DSCR (rent ÷ PITIA) | 1.10 | 1.05 | 1.22 |
Illustrative numbers. Programs set their own minimums and rent rules; none are implied.
Worked example: three versions of one property
The same house can pass or miss a program's minimum depending on the down payment and the insurance quote. The table runs the illustrative numbers three ways.
What moves the ratio
A larger down payment lowers principal and interest. Tax and insurance estimates matter a lot in California, especially insurance. HOA dues count in full. Rate changes move it most of all.
Next step
Francisco's lending page covers 1–4 unit rentals, including DSCR. You can model payments with the calculators before you talk.
Frequently asked questions
What does DSCR stand for?
Debt service coverage ratio: here, rent divided by the full housing payment.
Do DSCR loans use my personal income?
Typically they qualify mainly on the property's rent rather than personal income documents, though credit, reserves and other factors still apply.
What is a good DSCR?
Programs set their own minimums. Many look for at least 1.00, and some allow lower with tradeoffs. Check the specific program.
Sources
First rental in California: what AB 1482 means for a new landlord
The statewide rent cap and just-cause rules, the single-family exemption and its required notice, and what changed with SB 567.
How to read a Loan Estimate, page by page
Where to look on the three-page Loan Estimate to compare two lenders fairly: loan terms, closing costs and the comparisons box.