Debt Service Coverage Ratio (DSCR) is a measurement of the net income of a rental property against the debt service of a rental property. If there is not enough net income (which is income after expenses) to cover the mortgage (debt payment) then the investor will have to provide funds from other sources to pay the mortgage, or in a worst case scenario, the property could foreclose.
Banks use the Debt Service Coverage Ratio as part of their decision to lend funds on an investment property. If the Debt Service Coverage Ratio is too negative, or unacceptable to the bank, (say a DSCR below 1.2) then the bank may decline the mortgage application.
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