# Debt Service Coverage Ratio

*Real Estate — Finicade finance glossary*

DSCR compares net operating income to annual debt payments, and commercial lenders typically require 1.20–1.25 as a minimum. Below 1.0 the property doesn't cover its own mortgage. DSCR loans for residential investors underwrite the property's income rather than the borrower's, which is why they're the standard route for buyers who already own several rentals.

**Formula:** `DSCR = Net operating income ÷ Annual debt service`

**Also known as:** DSCR, debt service cover, DSCR loan

**Related terms:** [Net Operating Income](https://finicade.com/glossary/net-operating-income), [Interest Coverage Ratio](https://finicade.com/glossary/interest-coverage-ratio), [Commercial Real Estate](https://finicade.com/glossary/commercial-real-estate), [Covenant](https://finicade.com/glossary/covenant), [Rental Property](https://finicade.com/glossary/rental-property)

Source: https://finicade.com/glossary/debt-service-coverage-ratio