Our DSCR loan page covers the whole program, and our how to calculate DSCR guide walks through the formula line by line. This post zooms in on the one line in that formula that investors guess at most often.

Every market figure here was checked on November 9, 2026 against HUD User's FY2027 Fair Market Rents and Census Bureau QuickFacts. The payment math uses Freddie Mac's 7.18% 30 year average from November 5, 2026 as a reference rate only. It is a conventional loan average, not a DSCR rate and not a rate we are quoting.

Yes, Insurance Is in the Ratio

The ratio is rent divided by the full monthly housing payment, and the insurance premium is one of the five pieces of that payment.

Lenders and investors call it PITIA: principal, interest, taxes, insurance and association dues. The loan amount and rate set the first two. The county sets the tax. The HOA, if there is one, sets the dues. Insurance is the only piece where the buyer shops for the number, which is exactly why it gets underestimated. If the quote you used to screen the deal is lower than the policy you actually bind, the ratio at closing will be lower than the ratio you planned on.

Flood insurance, when a lender requires it, goes into the same payment. So does any separate wind or hail policy where one is needed.

What $100 a Month Does

On a rental that starts near 1.10, each extra $100 a month of premium costs about 0.06 to 0.07 of ratio.

Here is a simple example, using example numbers, not market data and not a quote: rent of $1,600 and principal, interest and tax of $1,350 a month.

The same house, the same rent and the same loan cross from a comfortable 1.10 to under 1.00 on nothing but the insurance quote. Our ratio floor is 0.50, so the deal can still be financed below 1.00, but the gap between your screen and your closing numbers is what catches people off guard.

Shop the insurance before you write the offer, not after the inspection.

Nine Counties, Checked

Lucas County, Ohio can carry the most premium at its median, Kent County, Michigan comes next, and East Baton Rouge Parish, Louisiana cannot reach 1.00 on a 30 year fixed even with $1,200 of insurance.

The setup: buy a three bedroom at the county's Census median value with 25% down, a 30 year fixed at the 7.18% reference rate, tax at 1.0% of value a year (an example rate, not the county's actual rate) and rent at HUD's FY2027 three bedroom Fair Market Rent. The last column is the most yearly premium the deal can carry at a 1.00 ratio.

Two patterns stand out. A low price relative to rent buys you insurance room: Toledo's $163,900 median against a $1,461 rent leaves space for almost $6,000 a year. And a market where rent is thin against price, like Baton Rouge, has no insurance room at all on a fixed payment, because the principal, interest and tax alone already run past the $1,456 benchmark. HUD's three bedroom benchmark fell for FY2027 in East Baton Rouge, Pulaski and Milwaukee, and rose in the other six.

Run the DSCR on your deal

How Interest Only Changes the Budget

Interest only at 30% down adds roughly $1,800 to $3,100 a year of insurance room in these counties, and it is the only way Baton Rouge reaches 1.00 at its median.

Our interest only DSCR loan terms are ten years interest only on a 40 year term, or a 30 year term with interest only, up to 70% LTV on a purchase. On the same example tax and the 7.18% reference rate, the most yearly premium each median rental can carry at 1.00 becomes:

Interest only does not make the premium smaller. It makes the rest of the payment smaller, which leaves more of the rent to absorb whatever the insurer charges.

The Policy Behind the Number

A rental needs a landlord policy, and the coverage the lender wants to see is confirmed per file, so get the right kind of quote from the start.

A homeowners policy is written for a house you live in. A rental is usually covered by a landlord or dwelling fire policy, which insures the building, often covers lost rent after a covered loss and carries liability for the owner. It tends to price differently from a homeowners policy on the same house. The exact coverage amounts, deductibles and rent loss requirements a given loan needs are confirmed per file, so send us the quote and we will check it against the file before you bind it.

Taxes interact with this too. In a state like Indiana, where a rental's tax is capped at 2% of assessed value, the tax line is predictable and the insurance line is where the swing lives; our Indiana 2% tax cap post shows that math city by city.

Ways to Keep the Premium in Line

The levers that move a landlord premium most are the roof, the deductible and the coverage amount.

• Ask about roof age first. An older roof can raise the premium or shrink the coverage, so ask the insurer before you offer.
• Price two deductibles. A higher deductible lowers the premium, but you need the cash to cover it after a claim.
• Insure the rebuild cost, not the price. Over insuring a cheap house wastes premium; under insuring it is worse.
• Check flood zone status early. A required flood policy can change the ratio more than any other line.
• Quote more than one carrier, and ask whether bundling with your other rentals helps.

For the cash side of the deal, our DSCR loan reserve requirements guide covers when you need reserves and when you do not: no reserves under $1 million and under 75% LTV, no asset sourcing and no seasoning. A 100% gift can cover the down payment, closing costs and reserves, cash out goes up to 80% LTV, loans go up to $5 million, and first time investors with no home owned and no VOR are welcome. Self employed borrowers who would rather qualify on deposits can look at our bank statement loans, and our loan programs page lists the rest.

Where Investors Get Burned

They get burned when the screening quote and the bound policy are two different products.

My Insurance Checklist

1. Get a landlord quote on the actual address before you offer.
2. Put the full premium in the DSCR, plus flood or wind coverage if needed.
3. Run the ratio at the quote and at 25% more, so a renewal does not surprise you.
4. Compare a 30 year fixed with interest only if the ratio is close to 1.00.
5. Send us the deal. We run the DSCR the way the lender will in any of our 35 states.

Sources

All sources checked November 9, 2026. Data changes, so confirm before you rely on it.

1. HUD User, FY2027 Fair Market Rents, county summaries. 3 bed FY2027 (FY2026): Toledo OH $1,461 ($1,380); Grand Rapids Wyoming MI $2,113 ($1,980); Mobile AL $1,474 ($1,414); Fort Wayne IN $1,534 ($1,381); Tulsa OK $1,611 ($1,602); Little Rock North Little Rock Conway AR $1,504 ($1,540); Lexington Fayette KY $1,948 ($1,743); Milwaukee Waukesha WI $1,553 ($1,648); Baton Rouge LA $1,456 ($1,511)
2. U.S. Census Bureau QuickFacts, county profiles (Lucas OH, Kent MI, Mobile AL, Allen IN, Tulsa OK, Pulaski AR, Fayette KY, Milwaukee WI, East Baton Rouge LA). Median value of owner occupied housing units, ACS 2020 to 2024: $163,900, $289,900, $190,700, $214,900, $230,400, $214,700, $293,500, $230,700, $248,800
3. Indiana Department of Local Government Finance, Fact Sheet: Circuit Breaker Tax Caps (November 2025). 2% cap on residential property that is not a homestead, measured against gross assessed value
4. Freddie Mac Primary Mortgage Market Survey. 30 year fixed average 7.18% as of November 5, 2026 (reference only)
5. Pillar Mortgage Group DSCR program terms. DSCR as low as 0.50; interest only 10 years on a 40 year term or a 30 year term with interest only, up to 70% LTV purchase; no reserves under $1M and under 75% LTV; 100% gift; cash out up to 80% LTV; loans up to $5M; 35 states

Frequently asked questions