DSCR is short for debt service coverage ratio.

DSCR is a metric lenders use to determine if a borrower or property generates enough revenue to make the mortgage payments.

Lenders have various twists in how they compute DSCR, but it's generally calculated by dividing the monthly gross rental income (or net operating income) by the monthly debt service cost.

Conservative lenders like to see DSCRs of 1.25 or higher on residential rental properties. Others want to see 1.10. Some are satisfied with a DSCR of only 1.0. In certain cases, higher-risk lenders will even go below 1.0.

The actual DSCR minimum will depend on the lender's calculation formula and risk tolerance.

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