A low DSCR score can feel like a brick wall in your financing process—but most investors don’t realize how fixable it is. DSCR, or Debt Service Coverage Ratio, simply measures whether your property’s income can support its mortgage payment. A DSCR below 1.0 signals that rent isn’t covering debt on paper. The good news? In most cases, the problem is structural, not operational.
1. Shift to a 40-Year Interest-Only Loan
Many lenders offer 40-year IO terms because they lower the monthly mortgage payment by 10–18%. This alone can push a deal from a failing DSCR to a clean approval.
2. Use Market Rent Instead of Current Rent
If your tenant pays below-market rent, your DSCR calculation suffers. A lender-issued 1007 Market Rent Schedule can increase the income side of the equation instantly.
3. Reduce Taxes and Insurance
These two expenses have more impact on DSCR than investors realize. Re-shopping insurance or correcting inflated tax estimates can immediately improve the ratio.
4. Make a Small Principal Payment
A 3–5% balance reduction may be enough to bring DSCR over the line. It shows commitment and lowers lender risk.
5. Clean Up HOA and Utility Miscalculations
Many DSCR declines come from overstated HOA or utility assumptions. Correcting these numbers can create the DSCR margin you need.
Conclusion
A low DSCR score isn’t a deal killer—it’s a math puzzle. When you understand how lenders calculate the ratio and what levers you can adjust, you gain real control over your loan approval. With the right structure, even borderline deals can move smoothly to the closing table.
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If you’re working on a DSCR deal and need guidance or funding options, contact us today. We help investors structure smarter, stronger, and more fundable rental loans.Need help structuring your loan file or analyzing your deal? Reach out on .Message me on WhatsApp: +1 448-230-7488
Email: annie@insightflending.com