Conventional commercial real estate lenders most often require a minimum DSCR of 1.25x on stabilized properties, with preferred ratios of 1.35x or higher. SBA 7(a) and 504 loans usually call for at least 1.15x. Bridge and construction loans accept lower or even break-even DSCR at closing because lenders underwrite to a stabilized pro-forma. Agency multifamily lenders (Fannie Mae, Freddie Mac) use 1.25x as a baseline but flex tighter or looser depending on loan-to-value, market tier, and recourse.

NOI = Effective Gross Income − Operating Expenses. Effective Gross Income is gross potential rent minus vacancy and credit losses, plus other property income (parking, laundry, fees). Operating Expenses include property taxes, insurance, utilities, repairs, management fees, and a replacement reserve. Critically, NOI excludes mortgage principal and interest, income taxes, depreciation, amortization, and capital expenditures — those costs are accounted for separately or sit below the NOI line.

Property DSCR measures only the income and debt service of a single property — useful for non-recourse loans where the property's cash flow has to stand on its own. Global DSCR aggregates all of the borrower's (or guarantor's) income and all of their debt obligations — personal salary, other property NOI, business cash flow, plus all loan payments. SBA lenders almost always underwrite to a global DSCR; CMBS lenders typically focus on the property number. A borrower with strong outside income can have a weak property DSCR but a healthy global figure.

Two levers: raise NOI or lower debt service. To raise NOI, push rents at lease renewal, reduce vacancy, contest property tax assessments, renegotiate insurance, and cut controllable operating expenses. To lower debt service, put more equity in (smaller loan), negotiate a lower interest rate, lengthen amortization from 20 to 25 or 30 years, or use an interest-only period. Even modest changes compound: trimming expenses 5% and stretching amortization from 20 to 25 years can move a 1.15x DSCR above 1.25x.

A DSCR loan is a non-QM investment property loan that qualifies the borrower based on the property's DSCR rather than personal W-2 income, tax returns, or debt-to-income ratio. Lenders typically require a DSCR of 1.00x to 1.25x using rental income (often supported by an appraisal's rent schedule or Form 1007). DSCR loans are popular with self-employed real estate investors and those with complex tax returns, but they generally carry higher rates and require larger down payments — usually 20–25% — than conforming loans.

DSCR normalizes coverage into a single ratio that's comparable across loan sizes and property types. Two properties might both generate $100,000 of free cash, but one with $80,000 of debt service (1.25x) is much safer than one with $95,000 of debt service (1.05x). Bank regulators, loan committees, and the secondary market all use DSCR thresholds in their underwriting standards and concentration limits, so it travels well from origination through servicing and securitization.

Yes — debt service includes the actual scheduled payment, whether fully amortizing, partial-IO, or pure interest-only. During an IO period DSCR will look stronger than after the loan starts amortizing, so prudent underwriters also run a stress DSCR using the fully amortizing payment to make sure the borrower can survive the conversion. Some lenders publish both ratios on the loan summary.

All three are tied through the loan constant. For a given interest rate and amortization, debt service per dollar of loan is fixed (the loan constant). If the property's cap rate exceeds the loan constant, leverage adds DSCR cushion; if the cap rate is below the constant, the deal is negatively leveraged and DSCR will be thin even at moderate LTV. That's why current-cycle commercial deals often hit a DSCR constraint before an LTV one — the maximum loan is sized down to meet the 1.25x ratio rather than to the LTV cap.