Frequently Asked Questions

What is the formula for DSCR on a rental property?

DSCR equals monthly rental income (typically 75% of gross rent) divided by monthly PITIA (principal, interest, taxes, insurance, and HOA dues). A DSCR of 1.0 means the property exactly covers its payment. Above 1.0 means positive cash flow; below 1.0 means the rent does not fully cover the mortgage.

What is PITIA in a DSCR calculation?

PITIA stands for Principal, Interest, Taxes, Insurance, and Association (HOA) dues. It is the total monthly carrying cost of the loan and is the denominator in the DSCR formula. All components must be included for an accurate calculation.

What DSCR do I need to qualify for a DSCR loan?

Most programs prefer a DSCR of 1.0 or above. A DSCR of 1.25 or higher accesses the most competitive pricing. Some programs accept DSCR below 1.0 with compensating factors such as a larger down payment or higher credit score.

Why is only 75% of rental income used in DSCR calculations?

Lenders apply a 75% factor to gross rent to account for vacancy periods and management costs. This creates a more conservative, realistic income figure. Some programs use higher percentages for properties with executed leases.

Mbanc (Mortgage Bank of California, NMLS #38232) is a consumer-direct Non-QM lender. This content is for informational purposes only and does not constitute a commitment to lend. All loans subject to credit approval.

Mbanc NMLS #38232 | Equal Housing Opportunity Lender

About the Author

Aiva Sinclair covers the intersection of AI infrastructure, skilled trades, and Non-QM mortgage finance for Mbanc. Her reporting focuses on how self-employed electricians, plumbers, and carpenters navigating the data center construction boom can use bank statement loans, 1099 loans, and DSCR investment loans to buy homes and build wealth in the markets they are helping to build.

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