1. What is DSCR Loan Down Payment?

The DSCR (Debt Service Coverage Ratio) Loan Down Payment calculation determines the minimum down payment required to achieve a target DSCR for a commercial real estate loan. It ensures the property's net operating income sufficiently covers the debt service.

2. How Does the Calculator Work?

The calculator uses the DSCR down payment formula:

Where:

• \( \text{Loan Amount} \) — Total loan amount requested (USD)
• \( \text{NOI} \) — Net Operating Income (USD)
• \( \text{Target DSCR} \) — Desired Debt Service Coverage Ratio (unitless)
• \( \text{Debt Constant} \) — Annual debt service per dollar of loan (decimal)

Explanation: The formula calculates how much down payment is needed so that the resulting loan amount will have the desired DSCR based on the property's income.

3. Importance of DSCR Calculation

Details: Lenders use DSCR to assess a property's ability to generate enough income to cover loan payments. A higher DSCR indicates lower risk for the lender.

4. Using the Calculator

Tips: Enter the loan amount you're requesting, the property's annual NOI, your target DSCR (typically 1.20-1.35), and the debt constant (provided by your lender).

5. Frequently Asked Questions (FAQ)

Q1: What is a good DSCR for commercial loans?
A: Most lenders require a minimum DSCR of 1.20-1.25. Higher ratios (1.35+) may get better terms.

Q2: How is debt constant determined?
A: It's based on the loan's interest rate and amortization period. Your lender can provide this value.

Q3: Can I get a loan with DSCR below 1.0?
A: Rarely. Most lenders require DSCR ≥1.0, meaning income must at least cover debt payments.

Q4: What if my calculated down payment is negative?
A: This means the property's income supports a larger loan than requested. Minimum down payment would be $0.

Q5: Does this work for residential loans?
A: No, DSCR calculations are primarily for commercial real estate loans.