Investor education

DSCR loan glossary

Plain-English definitions for the DSCR loan terms real estate investors see when comparing business-purpose rental property financing.

DSCR term

Debt Service Coverage Ratio (DSCR)

A ratio that compares net operating income to debt service for an investment property.

Investor note: A higher DSCR generally means more income cushion, but lender partners also review credit, reserves, collateral, and program rules.

DSCR term

Net Operating Income (NOI)

Rental income minus operating expenses before debt service.

Investor note: NOI should use supportable rent and realistic expenses so DSCR is not overstated.

DSCR term

Debt Service

The loan payment used in the DSCR calculation, typically principal and interest or another lender-defined payment measure.

Investor note: Use the proposed new payment for purchase/refinance scenarios, not just the current payment.

DSCR term

Loan-to-Value (LTV)

Loan amount divided by property value or purchase price, depending on lender review.

Investor note: Lower LTV can reduce debt service and may improve overall program fit.

DSCR term

Reserves

Post-closing liquidity available to cover payments, vacancies, repairs, and other property risks.

Investor note: Reserves can matter even when the property cash flow looks strong.

DSCR term

PITIA

Principal, interest, taxes, insurance, and association dues.

Investor note: Some investors use PITIA as a shorthand payment measure, but DSCR program definitions vary.

DSCR term

Prepayment Penalty

A loan term that may charge a fee or limit flexibility if the loan is paid off early.

Investor note: Compare prepayment terms alongside rate, points, LTV, and intended hold period.

DSCR term

Cash-Out Refinance

A refinance where the investor accesses equity by taking a larger loan than the current payoff.

Investor note: Cash-out can raise debt service, so test the post-refinance payment in the calculator.

DSCR term

Short-Term Rental (STR)

A rental property operated through nightly or short-duration stays, such as Airbnb-style rentals.

Investor note: Use conservative income and include platform, cleaning, utility, furnishing, and management costs.

DSCR term

Business-Purpose Loan

A loan used for investment or business purposes rather than a consumer primary-residence purpose.

Investor note: DSCRCalculator.com is for non-owner-occupied business-purpose investment property scenarios only.

Ready to run the numbers?

Use the DSCR calculator to estimate NOI, debt service coverage, and monthly cushion for a business-purpose investment property scenario.

Open DSCR Calculator