What Is DSCR?
Debt Service Coverage Ratio (DSCR) measures a property's ability to cover its loan payments from operating income. It's the first metric every lender looks at when underwriting a commercial or investment property loan. DSCR = NOI ÷ Annual Debt Service.
DSCR Loan Requirements in 2026
- 1.0x: Break-even. Property barely covers debt. Most lenders won't touch it.
- 1.20x: Minimum for most conventional and portfolio lenders.
- 1.25x: Standard SBA 504 and CMBS minimum.
- 1.35x+: Preferred by agency lenders (Fannie/Freddie multifamily).
- 1.50x+: Strong — gives borrower leverage to negotiate rate and terms.
How Lenders Use DSCR
Lenders use DSCR to size the loan. If your property's NOI doesn't support the DSCR minimum at the requested loan amount, the lender will reduce the loan until it does. This is called "debt-yield constrained" underwriting — common in today's environment when rates are elevated.