The Debt Service Coverage Ratio (DSCR) compares a rental property's net operating income (NOI) to its annual mortgage payments (debt service). A DSCR of 1.0 means income exactly covers the mortgage; above 1.0 means surplus income.
DSCR = Annual NOI ÷ Annual Debt Service
Most DSCR loan lenders require a minimum of 1.0–1.25. A DSCR of 1.25 means the property generates 25% more income than needed to cover the mortgage, providing a safety buffer.
Lenders often use PITIA (Principal + Interest + Taxes + Insurance + Association dues) as the debt service figure, not just P&I.