DSCR is the ratio banks and private lenders use to size and approve investment property loans. It measures whether the property generates enough income to cover its mortgage payment with a buffer. A DSCR of 1.0 means rent just barely covers debt service; a DSCR of 1.25 means rent covers the mortgage 1.25 times, leaving a cushion for vacancy and repairs.
For DSCR rental loans, lenders typically require a minimum of 1.0 to 1.25 depending on the program. The property qualifies on its own cash flow, not the borrower's personal income, which is why DSCR loans are popular with investors scaling beyond conventional limits.
NOI goes in the numerator and PITI (or P&I depending on the lender) goes in the denominator. Some lenders use gross rent instead of NOI, which produces a more generous ratio. Always confirm which definition your lender uses before running the math.
Example
A property with $24,000 NOI and $18,000 in annual mortgage payments has a 1.33 DSCR.