How much you can borrow with a DSCR loan: work backward from the rent

The four steps

1. Start with the rent a lender will count. See building a rent number.
2. Divide by the minimum DSCR. At 1.20, a rent of $2,400 supports a total payment of $2,000.
3. Subtract taxes, insurance and dues. If those total $450, $1,550 is left for principal and interest.
4. Let the lender convert it. The rate and term decide how large a loan that $1,550 supports, and the lender's loan to value limit sets a ceiling from the price side.

What moves the answer

Three levers to raise the loan size

1. Raise the rent that counts. A stronger lease, a documented market rent or a property type that rents higher increases the supported payment.
2. Lower the carrying costs. Shop insurance, verify the tax estimate and ask about association dues. Every dollar saved on these leaves a dollar more for principal and interest.
3. Change the structure. A longer term, an interest-only option on programs that offer it, or a smaller loan with more cash down can each change what the rent supports. Each trades something, such as a higher payment later or more cash today.

When the loan to value limit binds first

Sometimes the rent supports a larger loan than the lender will give against the value. In that case the lender's loan to value ceiling sets the loan, and your down payment is whatever the price minus the loan works out to be. High-rent, low-price properties tend to hit the ceiling first. High-price, low-rent properties tend to hit the ratio first. Knowing which limit applies to your target property tells you whether to chase rent or chase a lower price.

Do it with your numbers

Enter the rent, taxes, insurance and dues in the DSCR calculator to see the ratio for a loan amount you are considering. If the ratio falls short, read how to lift a weak DSCR. Rent, taxes and insurance differ by market, so check local figures on our state pages.

Why two investors get different answers

The same property can support different loan amounts for different borrowers because the minimum DSCR, the maximum loan to value and the pricing depend on credit, experience, property type and the lender. A stronger credit profile can lower the minimum ratio or raise the leverage limit. A first-time investor may face a lower leverage limit. A condo or a short-term rental may use different rules from a long-term single-family rental. Ask for a scenario-specific answer instead of relying on a general rule.

Taxes and insurance differ by place

Two properties with the same rent and the same price can have different tax and insurance costs, and those costs sit in the payment the rent has to cover. A state that reassesses at sale, a coastal location with wind and flood coverage, or a condo with high association dues will each shrink the room left for principal and interest. Check local costs on our state pages and get real quotes before you rely on a loan size.

Minimum loan amounts and small properties

Some lenders set a minimum loan amount, so a very inexpensive property may not fit a given program even when the ratio is strong. If your target is a low-priced property, ask about minimums at the start so you do not spend time on the wrong lender.

Reserves count too

A bigger loan is not the whole story, because the lender will also ask for cash left after closing. Reserves are usually measured in months of the full payment, so a larger payment raises the reserve you need. Include the reserve requirement when you decide how large a loan to take.