Can't Hit 1.25x DSCR? Here's How to Fix It

Your DSCR calculator says 0.98x. The deal looks dead. Before you walk away, try these moves.

Quick Refresher

DSCR = Monthly Rent ÷ Monthly PITIA

PITIA = Principal + Interest + Taxes + Insurance + HOA. Lenders want 1.25x minimum for the best rates. Below 1.0x, most won't touch it.

7 Ways to Improve Your Ratio

1. Put more down. Going from 20% to 25% down reduces your loan amount and monthly payment. Often enough to jump from 1.1x to 1.3x.

2. Buy down the rate. Paying 1-2 points upfront lowers your monthly payment permanently. Do the math — on a long-term hold, it usually pays for itself in 2-3 years.

3. Get a rent survey. If the appraiser's rent estimate is low, order a formal rent survey. Market rents from Rentometer or actual comps can push your number higher.

4. Short-term rental income. Some lenders accept Airbnb/VRBO projections (typically at 75% of projected income). If the property works as a STR, this can significantly boost DSCR.

5. Shop insurance aggressively. A $200/month insurance savings improves DSCR more than you'd think. Get 3-4 quotes.

6. Challenge the tax assessment. If property taxes are based on a previous higher sale price, appeal them.

7. Find a lender with 1.0x minimum. They exist. You'll pay a higher rate (add 0.5-1.0%), but you'll get the deal done.

Real Example

$400K property, $3,000/month rent, 25% down at 7.5%:
- Monthly PITIA: $2,650
- DSCR: 1.13x (not great)

Same deal, buy rate to 7.0% + shop insurance (-$150/mo):
- Monthly PITIA: $2,380
- DSCR: 1.26x ✅

Small tweaks. Big difference.

Check your DSCR →

Bill McCoy | Better Offers Inc | CA DRE #01902006