Debt Service Coverage Ratio (DSCR)

A financial metric comparing a borrower’s annual total debt obligations to its net operating income. Lenders use DSCR when a borrower applies for a loan (or to refinance an existing loan) to gauge a borrower’s financial health and to determine the maximum loan amount.

For example, in real estate, lenders use DSCR as an indication of whether a property can generate sufficient income to cover its mortgage payments.