DSCR Calculator
Debt Service Coverage Ratio for commercial real estate, multifamily, SBA, and residential DSCR loans. NOI ÷ annual debt service, with tier classification against the standard 1.20 / 1.25 lender floors — plus a detailed mode that derives NOI from rents and debt service from loan terms.
Clears the standard 1.20x CRE underwriting floor and the SBA 504 1.25x bar (when ≥ 1.25). Most banks will fund this.
per year
$8,000/mo P&I
NOI minus debt service — what's left after the mortgage every year, before tax and capex.
Blue = NOI. Gray = annual debt service. The dashed green line marks the NOI level required to clear the standard 1.20x lender floor. NOI to the right of that line is qualifying; to the left, it's not.
View the TypeScript implementation on GitHub: packages/calc/src/dscr.ts · view tests
DSCR underwriting at a glance
Key facts
- The formula
- DSCR = Net Operating Income ÷ Annual Debt Service. A DSCR of 1.25x means $1.25 of NOI for every $1 of principal and interest — a 25% cushion. Below 1.0x, the property doesn't generate enough operating income to cover its own debt.
- What NOI includes
- NOI is property income (rents + other income) minus property operating expenses (taxes, insurance, management, repairs, utilities, reserves) — and by definition it excludes mortgage P&I, depreciation, income tax, and capex.
- Commercial bank floors
- Most commercial banks underwrite to a 1.20x–1.25x minimum DSCR for stabilized properties. Fannie Mae's Multifamily Selling Guide floors typically land at 1.25x for standard fixed-rate loans and 1.30x or higher for non-recourse or aggressively leveraged structures.
- The SBA floor
- SBA SOP 50 10 6 sets a 1.15x minimum DSCR for SBA 504 owner-occupied real estate loans, but most participating banks and CDCs require 1.20x–1.25x in practice — the SBA floor is the worst-case backstop, not the underwriting target.
- Below 1.0x
- Banks rarely fund sub-1.0x deals at origination — the capital comes from sponsor equity or specialty bridge lenders pricing the risk explicitly, typically on value-add plays where pro-forma NOI is projected to clear 1.20x.
Thresholds per the Fannie Mae Multifamily Selling Guide §B6 and SBA SOP 50 10 6. Updated May 2026.
What this means
DSCR is the floor every commercial real estate lender starts with. A deal at 1.20x is fundable; a deal at 1.18x is not, and no amount of rate negotiation changes that — the bank's credit committee runs the same formula you just did and gets the same answer. The number most worth tracking isn't the underwriting-day DSCR; it's the stress-tested DSCR. A deal that pencils at 1.25x today and crashes to 0.95x at 88% occupancy is one bad lease-up away from default. A deal that holds 1.20x even at 85% occupancy and a 25 bps rate bump is real.
The two highest-leverage levers are NOI (rents and operating expenses) and debt service (loan size and rate). Raising rents by $25/unit/month on a 50-unit building adds $15K/year of NOI — at a 1.25x ratio target, that's $12K of additional debt service the property can support, or roughly $150K of additional loan at 7.5%/30y. Cutting expenses has the same arithmetic, but most operating expense lines (taxes, insurance) aren't actually within a buyer's control. The lever that almost always moves DSCR fastest is loan sizing: drop LTV, drop debt service, drop the deal's sensitivity to rent or expense surprises.
Worked example
Twelve-unit apartment building. $200,000 of gross annual rents at 100% occupancy, 7% vacancy assumption. No other income. Operating expenses of $80,000/year — taxes, insurance, management, repairs, utilities — which is 40% of effective gross income, the typical band for stabilized garden-style multifamily. Property purchase $2,000,000 with 25% down, so the loan is $1,500,000 at 7.5% for 30 years.
Effective gross income: $200,000 × 0.93 + $0 = $186,000. NOI: $186,000 − $80,000 = $106,000. Monthly P&I on $1.5M at 7.5%/30y is ~$10,488, so annual debt service is $125,856. DSCR = 106,000 ÷ 125,856 = 0.84. Non-qualifying.
Now run the levers. Drop LTV from 75% to 70% — loan is $1.4M, monthly P&I drops to ~$9,789, annual debt service to $117,468. DSCR = 0.90. Still non-qualifying. To clear 1.20x at this $106K NOI, max debt service is $88,333 — at 7.5%/30y that backs into a max loan of ~$1,053,000, roughly 47% LTV.
Conclusion: at current rates, this property doesn't pencil at 25% down. It needs more equity (closer to 50%), a rate drop of 100+ bps, or higher rents — about $1,400/month/unit average, up from $1,389. Two of those three levers aren't under the buyer's control. This is what tight-DSCR underwriting looks like in a post-2024 rate environment, and it's why deal flow drops when rates rise: the math just stops working at the same purchase price.
Frequently asked questions
The information and tools on this website are for general educational purposes only and do not constitute financial, investment, legal, or tax advice. Consult a licensed professional for decisions specific to your situation.