By Michael DuBois · Published 2026-10-04 · Last updated 2026-10-04
What goes into a debt-service coverage ratio?
In general, a ratio compares property income available for debt service with the required debt payments over the same period. Exact definitions differ among lenders and property types; Fannie Mae's multifamily guidance, for example, defines underwritten DSCR using underwritten net cash flow divided by annual debt service.
For a small rental property, ask the proposed lender what rent evidence it uses and whether taxes, insurance, association charges, repairs and vacancy are reflected in its analysis.
Why can two lenders reach different answers?
A lender may use different rent assumptions, expense deductions, credit rules, reserves, property limits or prepayment provisions. Ask for each lender's written requirements rather than relying on a single advertised ratio.
What should you do before using rental income to qualify?
Run a realistic cash-flow budget, include repairs and vacant months, then compare the loan's payment and total cost with alternatives. A property supporting the lender's ratio does not remove the risk of ownership.
Sources and next steps
Read the related loan option, or bring your own numbers to a conversation with Michael.