Will the rent cover the payment?

One line: gross rental income divided by the qualified monthly mortgage payment, PITIA, or ITIA where the loan is interest-only. PITIA is principal, interest, taxes, insurance and HOA dues on the subject property.

What matters is what is not in it. There is no vacancy factor, no management fee and no maintenance or capital reserve deducted. That is what separates a residential DSCR from the net operating income ratio used on commercial property, and it is why a residential DSCR number is not comparable to the ratio on an apartment building.

HOA dues sit in the denominator. A high-dues condominium can fail on the association fee alone while an identical detached house passes, which is worth knowing before you write an offer, not after.

A ratio of 1.00 means the rent exactly covers the payment. What ratio a programme requires is a different question, it varies, and it is confirmed on application. The field in the rail lets you test whichever figure you have been given.

Not from you. On a purchase there is usually no lease, so the appraiser supplies the rent: Fannie Mae Form 1007, the Single-Family Comparable Rent Schedule, for a one-unit property, and Form 1025, the Small Residential Income Property report, for two to four units.

Where there is a lease, underwriting measures the executed lease against the market rent on the 1007 or 1025. How the two are reconciled, which one governs, and how far apart they may sit, is a programme rule and varies, so ask before you rely on an above-market lease.

Short-term rental income is taken from gross receipts, usually a platform statement history rather than a lease, divided by twelve to give a monthly figure. Whether a programme uses that in full, discounts it, or trades it against leverage varies and is confirmed on application. This calculator uses it in full so the arithmetic is visible; substitute a discounted figure if that is what you have been quoted.

Two things, and the lower of them binds. Leverage caps the loan at a percentage of value. The ratio caps it at whatever balance the rent still covers to the minimum required. Which one binds tells you what to fix: a leverage cap is solved with more cash, a ratio cap is not.

The ratio ceiling is closed form rather than a search, because the payment is linear in the loan. Take the rent, divide by the minimum ratio, subtract taxes, insurance and dues, that is the payment the rent can carry, then divide by the payment factor for the rate and term. Interest-only has a much smaller factor, which is why it moves this number more than anything else on the page.

Both figures come from the rail. Actual leverage limits and minimum ratios are programme-specific, change without notice, and are confirmed on application.

The ratio is gross rental income over PITIA, or ITIA for interest-only, so an interest-only loan qualifies on the interest-only payment. It is the single largest lever in the product, a property that fails amortising can pass interest-only with nothing about the property changed.

The structure modelled here is ten years of interest, then amortisation over what is left of the term: twenty years on a thirty year note, thirty years on a forty year note. The payment steps up at that point, and it steps up harder than a fresh thirty year loan would, because the remaining balance has to clear over a shorter period.

The page shows what the same loan would score amortising, next to the interest-only ratio, so the lever is visible rather than hidden. Whether interest-only is available on a given file, and what it costs in leverage or rate, varies by programme.

No personal income documentation is not the same as no underwriting. There are no tax returns, no W-2s and no debt-to-income ratio, and qualification rests on the property. Everything else is still reviewed: credit, mortgage and housing history, reserves held after closing, entity formation documents where the loan closes in an LLC, the appraisal and the rent schedule behind it, and your experience as an investor.

Reserves are counted in months of the qualifying payment, the interest-only payment where the loan is interest-only, held in your own accounts after closing. How many months are required varies by programme and by file. The rail takes a figure and the page multiplies it by the qualifying payment; it does not assert what any lender requires.

Appraisal requirements, seasoning after past credit problems, whether subordinate financing is permitted and every other overlay are programme rules. This page states none of them. They are confirmed on application, which is a quick conversation rather than a research project.

This kind of lending is for investment property only, typically one to four units: single family, single family with one accessory dwelling unit, two to four unit properties, condominiums and co-operatives. Beyond that, rural acreage, mixed use, five or more units, eligibility and terms vary widely and often move to a different product altogether.

Eligible markets vary by programme and by state licensing, and are confirmed on application. Ask before you write an offer, it is a question with a quick answer, and it is not one a calculator should try to guess.

Prepayment penalties are common on business-purpose investment loans and rare on consumer mortgages, which is why they catch people out. Three shapes cover most of the market:

It is generally true across the market that accepting a longer prepayment term buys a better rate. What is not knowable from a calculator is how much, that is set by the market on the day, by the programme, and by everything else on the file. So this page shows no rate ladder and makes no claim about what any structure is worth.

What the page shows instead is arithmetic on your own loan: the balance after each year, and what each structure would charge to pay it off at that point. Which structures are available to you, and what each is worth in rate, is confirmed on application. Ask before you lock, on a property you intend to sell inside three years it is often the most consequential term on the loan.

A DSCR loan is business-purpose credit. Under Regulation Z, credit extended to acquire, improve or maintain rental property that is not owner-occupied is deemed to be for business purposes, regardless of the number of units. That is a deeming rule, not a presumption, and it is what the entire product rests on. Where the borrower is an entity rather than a natural person, the exemption at 12 CFR 1026.3(a)(2) applies independently.

The gate is a 14-day test. Official Interpretation 3(a)-4 to 12 CFR 1026.3 says that if the owner expects to occupy the property for more than 14 days in the coming year, the property cannot be treated as non-owner-occupied and the rule does not apply. There is no unit-count bright line for a rental you do not live in; a single-family house qualifies the same way a twenty-unit building would.

Because the loan is exempt under 12 CFR 1026.3(a), a series of consumer protections simply do not attach:

The HMDA line is the one people get wrong. The business-purpose exclusion in 12 CFR 1003.3(c)(10) has an “unless” clause: it does not apply where the loan is a home purchase, home improvement or refinancing. A DSCR loan on a one to four unit dwelling is normally one of those, so it is normally reportable. That is why you will still be asked for demographic information on a loan you were told is exempt from consumer regulation. Anyone telling you a DSCR loan is exempt from everything is wrong about this.

The ability-to-repay point is the one that matters most to you as a borrower. Because 12 CFR 1026.43(a) reaches only consumer credit, no lender is required to determine that you can repay this loan, and none will. Qualification rests on the property's cash flow. That is the freedom the product sells, and it is also the protection you are giving up.

Sources: eCFR 12 CFR 1026.3 and the CFPB Official Interpretations, comments 3(a)-1, 3(a)-3, 3(a)-4 and 3(a)-5; 12 CFR 1026.19, 1026.23, 1026.24, 1026.43; 12 CFR 1024.5(b)(2); 12 CFR 1003.3(c)(10); 12 CFR 1002.9(a)(3); 42 U.S.C. 3605; 47 CFR 64.1200.

You will sign a Business Purpose and Occupancy Affidavit at closing. It states that neither you, nor any family member, nor any member, partner or owner of the borrowing entity or their family, will occupy the property for more than 14 days in any calendar year while the loan is outstanding, and that you will not claim it as a primary or secondary residence. Loan proceeds must be used for business or commercial purposes.

Misrepresenting that is fraud, not a technicality. It is an Event of Default that permits immediate acceleration of the debt and foreclosure, it carries an indemnity running to the lender, and it can be prosecuted, 18 U.S.C. 1014 reaches false statements made to influence a federally insured institution and carries up to thirty years.

If you intend to live in this property, this is the wrong loan. Use the payment calculator for a primary residence instead. It will almost certainly be cheaper, and it comes with the protections this one does not.

The consumer calculators on this site show an annual percentage rate wherever one can honestly be computed, because Regulation Z requires an advertisement that states a rate to express it as an APR. That rule lives in 12 CFR 1026.24, inside Part 1026, and Part 1026 does not apply to business-purpose credit. So no APR is required here, and showing one would imply a disclosure regime this loan does not carry.

Rather than show nothing, this page shows something an investor can actually use: what the money costs over the period you say you will hold it, interest paid at the rate you entered, plus what it cost to get the loan, plus the penalty for leaving when you plan to leave. It is offered voluntarily. It is not an APR, it is not computed like one, and it is not a Regulation Z disclosure.

Sources: 12 CFR 1026.3(a); 12 CFR 1026.24(c).