Your Debt Service Coverage Ratio (DSCR) is the golden number that lenders look at to approve your loan. The higher the number, the better your interest rate and the lower your required down payment will be.
Why Higher DSCR Matters
A DSCR of exactly 1.0 means your property breaks even. Pushing your ratio to 1.25 or higher tells the lender that the asset is incredibly safe, unlocking their top-tier terms. If your ratio is low, here are proven ways to boost it.
4 Ways to Increase Your DSCR
- Increase the Rent: The most direct way to boost DSCR. Consider light renovations (paint, modern fixtures) that allow you to legitimately push market rent higher before the appraiser assesses the property.
- Reduce Expenses (Where Applicable): While lenders use standardized metrics for taxes and insurance, shopping for cheaper hazard insurance directly lowers your annual debt service.
- Bring a Larger Down Payment: Putting down 25% instead of 20% shrinks your loan amount. A smaller loan means a smaller monthly mortgage payment, instantly inflating your DSCR.
- Buy Down the Interest Rate: Paying points upfront at closing lowers your ongoing interest rate, scaling back your monthly payment and protecting your ratio.