How much will a lender actually lend on this rental?
Lenders size your loan twice, once by the property's value and once by its rent, and give you the smaller number. Deal Desk shows you both, tells you which one caps you, and gives you the read a credit officer would.
How a credit officer reads it
Rent, not value, is your limit.
Get the full Deal Desk Report
The stress test a lender runs (rate up 1%, rent down 10%, and both), the conditions they'd likely attach, and your break-even numbers. Free, sent to your inbox.
Rental purchase, $320,000
Stress test
A credit officer asks what happens to coverage if the deal gets a little worse. These scenarios hold your loan at the amount above.
| Scenario | Payment | DSCR | Max loan in this case | Read |
|---|
Break-even numbers
Conditions a lender would likely attach
A full Rental Credit Memo, written the way a bank credit officer would write it, is coming soon. Report subscribers hear first.
Why lenders size your loan twice
Every rental loan has two ceilings. The first is value: the lender will only lend a set share of the price or appraised value, the loan-to-value limit. The second is rent: the lender will only lend as much as the rent can carry once taxes, insurance and HOA dues are paid, with some room to spare. That room is the minimum DSCR.
The lender runs both calculations and gives you the smaller loan. Most investors only check the first one. They budget a 20% down payment, then learn a few weeks before closing that the rent supports less than 80% and they need more cash. That's the moment Deal Desk is built to catch.
The rent limit, step by step
Max principal + interest = max payment − taxes − insurance − HOA
Rent limit = the loan that max principal + interest pays off over the term
A worked example
A $320,000 single-family rental renting for $2,600 a month, with $4,200 a year in taxes and $1,800 in insurance. The lender offers 80% LTV at 7.25% over 30 years and wants a 1.20 DSCR.
| Step | Amount |
|---|---|
| Value limit: 80% of $320,000 | $256,000 |
| Payment on $256,000 (with taxes and insurance) | $2,246 / mo |
| DSCR at the full value limit: $2,600 ÷ $2,246 | 1.16 |
| Most payment the rent can carry at 1.20: $2,600 ÷ 1.20 | $2,167 / mo |
| Minus taxes and insurance ($500 / mo) leaves for the loan | $1,667 / mo |
| Rent limit: the loan $1,667 a month supports | $244,316 |
| Loan you'll be sized at (the smaller one) | $244,316 |
The rent limit binds, so this buyer brings about $11,700 more to closing than a 20% down payment. There are three ways to close that gap: rent of about $2,696 a month instead of $2,600, a price near $305,400 where both limits meet, or a lender whose minimum DSCR is lower. The last option usually costs you in rate.
What your DSCR tells a lender
| DSCR | How a lender reads it |
|---|---|
| Below 1.00 | The property doesn't cover its own payment. A bank won't approve it. A few non-bank programs will, with less leverage, a higher rate, and a property that costs you money every month. |
| 1.00–1.09 | Fundable with many DSCR lenders, but there's no cushion. One vacancy or one tax increase puts you underwater. |
| 1.10–1.24 | Usually approvable. Expect questions about reserves and the rent figure. |
| 1.25 and up | Where the best pricing and maximum leverage usually start. The number I'd want to see before calling a deal comfortable. |
Three things that shrink the rent limit after you're under contract
- The appraiser's market rent. Most DSCR lenders use the lower of your lease and the market rent on the appraisal's 1007 rent schedule. If the appraiser says $2,450, that's your rent.
- Taxes reset at the sale. The seller's tax bill isn't yours. Many counties reassess at the purchase price, and the lender escrows the new number.
- Insurance quotes come in high. Get a real quote before you trust the payment, especially on older houses or in storm-prone markets.
This is the Cash Flow question in the Bankable Seven, the seven questions every credit desk works through.
DSCR loan sizing, answered
What is the difference between DSCR and LTV?
LTV caps your loan as a percentage of the property's value. DSCR caps it by how much payment the rent can carry. A lender calculates both and lends you the smaller amount, which is why a deal can have a strong appraisal and still come up short.
Why did my DSCR loan amount get cut?
Usually because one of the inputs to the payment changed after you applied: the appraiser's market rent came in lower than your lease, the tax or insurance estimate went up, or the rate moved before you locked. Any of those lowers the loan the rent can support. Rerun Deal Desk with the lender's numbers to see which one did it.
What if the appraiser's market rent is lower than my lease?
Most DSCR lenders use the lower of the lease and the appraiser's market rent on the 1007 rent schedule. Some allow the higher lease with proof it has actually been collected, often two months of deposits. Plan on the lower number and treat anything better as a bonus.
What DSCR do lenders require?
Many DSCR programs lend down to 1.00, and some below it at a higher price and lower leverage. Better pricing and maximum leverage usually start around 1.20 to 1.25. Ask your lender for their pricing tiers by DSCR before you lock.
How much in reserves will a DSCR lender want?
Commonly 3 to 6 months of the full payment (principal, interest, taxes, insurance and HOA), held in liquid accounts after closing. Expect more if you already own several financed rentals. Deal Desk shows the dollar amount for the months you select.