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DSCR RequirementsJanuary 29, 2025

How to Increase Your DSCR Ratio to Qualify for Better Loan Terms

If your property's DSCR is too low to qualify or get the rate you want, here are 6 actionable strategies to improve it before applying.

Why Your DSCR Ratio Matters

The Debt Service Coverage Ratio directly determines whether you qualify for a DSCR loan, at what rate, and with how much leverage. A 1.25x DSCR may qualify for 80% LTV at the best rate. A 0.95x DSCR may not qualify at all at most lenders. Here are six ways to improve your DSCR before applying.

Strategy 1: Increase the Rent

The most direct lever is raising the numerator — the rent. On a vacant property, confirm the appraiser will assign maximum market rent. On an occupied property:

  • If the property is already leased at below-market rates, factor in that refinancing after the lease expires (when you can raise rent to market) will produce a better DSCR
  • Add amenities — washer/dryer hookups, storage, parking — that support a rent increase at renewal
  • For multi-unit properties, increasing even one unit's rent by
    00-200 can move the DSCR meaningfully

Example: A

,100 rent on a
,100 PITIA = 1.0x DSCR. Raising rent to
,400 = 1.14x DSCR — a completely different rate tier.

Strategy 2: Reduce the Mortgage Payment (More Down)

A larger down payment reduces the principal balance and therefore the monthly P&I payment, improving DSCR. On a $300,000 purchase at 8% interest:

If your DSCR at 20% down is 1.03x, putting 30% down might push it to 1.12x — a meaningful difference in rate and LTV options.

Strategy 3: Use an Interest-Only Structure

An interest-only loan reduces the payment by eliminating principal paydown. On $300,000 at 8%:

That 01 reduction can swing a 0.97x DSCR to 1.06x. Many DSCR lenders offer IO periods of 5-10 years.

Strategy 4: Buy Down the Interest Rate

Paying discount points to buy down your interest rate reduces the P&I payment, improving DSCR. Each 0.25% rate reduction on a $300,000 loan saves approximately $46-$50/month in payment. If 1 point ($3,000) reduces your rate from 8.5% to 8.0%, and that improves your DSCR from 1.02x to 1.12x, the points may be worth paying.

Strategy 5: Pay Down Property Taxes

Property taxes are part of PITIA. In states with high property taxes (Texas, New Jersey, Illinois), taxes alone can drag DSCR significantly. If you have the ability to pay property taxes in advance or to successfully appeal a high assessment, reducing the tax figure improves DSCR.

Strategy 6: Remove or Reduce HOA Fees

HOA fees are included in the PITIA denominator. Properties with no HOA (single-family non-HOA homes) produce better DSCR than otherwise comparable condo units with $300-$500/month in HOA dues. If you're evaluating similar properties, factor in the HOA drag on DSCR.

Quick DSCR Improvement Reference

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