1st Advantage MortgageTo improve a low DSCR, either raise the rent side or lower PITIA. The common levers are a larger down payment, a rate buydown, a cheaper insurance quote, a higher supported rent, an interest-only period on programs that offer it, a longer term, a different property or a different lender whose guidelines fit a lower ratio.
The ratio is rent divided by PITIA, so there are only two sides to change. Here are eight ways to move it. Not every option is available on every program, and some trade a better ratio for a higher cost elsewhere.
1. Put more money down
A smaller loan means a smaller payment, so principal and interest fall. A larger down payment also lowers the LTV, which can improve pricing.
2. Buy down the rate
Paying points can reduce the rate and the payment, and so raise the DSCR. Compare the cost of the points to the monthly savings and your holding period.
3. Shop insurance
Insurance is a direct part of PITIA. Compare quotes from several carriers, check deductibles and make sure coverage matches what the lender requires. In flood zones and on the coast, this can be the biggest lever.
4. Check the property tax estimate
A tax estimate that is too high can drag the ratio. Confirm the actual post-purchase estimate with the county rather than using a rough guess.
5. Support a higher rent
If the market supports it, a higher lease rent or a stronger appraisal rent schedule increases the numerator. Keep it realistic, because lenders verify it.
6. Ask about interest-only or a longer term
Some programs qualify on an interest-only payment, which lowers the payment used in the ratio. Interest-only periods end and the payment steps up, so plan for it. A longer term can also lower the payment.
7. Choose a different property
Sometimes the best fix is a different deal. A property with a better rent-to-price ratio, lower dues or lower insurance can clear 1.0 without changes elsewhere.
8. Use a lender that fits a lower ratio
Some programs accept DSCRs below 1.0 with trade-offs such as higher pricing or more reserves. Because we compare specialist lenders, we can show where your file fits.
Test your own property in the DSCR calculator, then ask us what fits.
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Keep reading
- How to Calculate DSCR for a Rental Property (With a Worked Example)
- DSCR Loan Documents Checklist for North Carolina and South Carolina Investors
- Buying a Rental Property in an LLC With a DSCR Loan in NC and SC
- DSCR Cash-Out Refinance in NC and SC: How Investors Pull Equity for the Next Deal
- DSCR Loan Closing Costs and 10 Questions to Ask Before You Lock
General information for investors, not legal, tax or lending advice. Programs and guidelines vary by lender and change. This is not a commitment to lend.
Frequently asked questions
Can I get a DSCR loan with a ratio below 1.0?
Some programs allow it, usually with a larger down payment, more reserves or higher pricing. It depends on the lender, so ask for options.
Does a bigger down payment raise DSCR?
Yes. A smaller loan lowers the principal and interest payment, which lowers PITIA and raises the ratio.
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- We compare specialist wholesale lenders instead of fitting you to one lender's menu
- Qualify on the property's rent, with no tax returns, W-2s or pay stubs on any program
- North Carolina and South Carolina investors, including first-time investors and LLC buyers
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