DSCR 1.0 vs. 1.25: What the Ratio Means for West Palm Beach Rental Properties

Feb 25 2026 16:01

Quick Summary: The Debt Service Coverage Ratio (DSCR) measures how well a rental property’s income covers its mortgage payment. A DSCR of 1.0 means the property breaks even, while 1.25 means the rent covers 125% of the payment—often resulting in easier approval and better pricing. For West Palm Beach investors, higher DSCR ratios typically unlock lower rates and more flexible terms. CTC Mortgage helps Palm Beach County investors analyze DSCR scenarios and structure financing around real cash‑flow performance.

What DSCR Really Means

DSCR compares a property’s rental income to its total monthly housing expense. It helps lenders determine whether the investment property can support its own payment without relying on the borrower’s personal income.

Formula: DSCR = Gross Monthly Rent ÷ PITIA

PITIA stands for Principal, Interest, Property Taxes, Insurance, and HOA dues (if applicable). It represents the full monthly cost of owning the property.

Example DSCR Calculations

Example 1: DSCR 1.0

If a West Palm Beach rental produces $2,500 per month and the PITIA payment is also $2,500:

DSCR = 2,500 ÷ 2,500 = 1.0

This means the property breaks even. Many DSCR lenders will still approve this, but the rate may be slightly higher and reserve requirements may increase.

Example 2: DSCR 1.25

If rent is $3,000 and PITIA is $2,400:

DSCR = 3,000 ÷ 2,400 = 1.25

This level signals strong cash flow and often results in better pricing and easier approval—especially important in competitive Palm Beach County markets.

What Different DSCR Levels Mean for Investors

DSCR 1.0

  • Break‑even cash flow
  • Most lenders will approve, but with stronger overlays
  • Rate may be higher to offset risk
  • Larger down payment or reserves may be required


DSCR 1.1

  • Moderate cash flow cushion
  • Improved chance of approval compared to 1.0
  • Better pricing and fewer lender overlays


DSCR 1.25

  • Strong cash flow profile
  • Often qualifies for the best DSCR loan pricing
  • Lower reserves and smoother underwriting
  • Ideal for investors scaling their portfolio in West Palm Beach


How to Improve DSCR

If your ratio is close—but not quite where it needs to be—there are several actionable strategies:

  • Use market rent comps: Appraisal‑based rental estimates (1007 form) may support higher rent than the current lease.
  • Analyze HOA costs: High HOA dues (common in Palm Beach County condos) can depress DSCR—compare alternative units or buildings.
  • Lower PITIA where possible: Better insurance quotes, HOA negotiation, or buying down the rate can improve the ratio.
  • Adjust your down payment: Even a small increase can reduce the monthly payment enough to raise DSCR.


Running DSCR Scenarios

Investors can estimate rent, cash flow, and PITIA using our online tools: Mortgage Calculators

Explore DSCR Loan Options


Start Your DSCR Pre‑Approval with CTC Mortgage

If you're investing in West Palm Beach or anywhere in Palm Beach County, CTC Mortgage can model DSCR scenarios, walk you through pricing tiers, and help you choose the best financing structure for long‑term cash‑flow performance.