Debt Service Coverage Ratio is the property's monthly gross rent divided by its total monthly housing payment (principal + interest + taxes + insurance + HOA). A DSCR of 1.00 means the property exactly covers itself; 1.25 means rent is 25% higher than the payment.
DSCR loans use the ratio as the primary qualifying metric instead of the borrower's personal DTI. Most lenders require a DSCR of 1.00 to 1.25, though some go down to 0.75 with stronger borrower credit and reserves.
DSCR is a game-changer for full-time real estate investors who don't show enough W-2 income to qualify conventionally. It also lets investors close in an LLC and skip personal income documentation entirely.