How to Calculate DSCR on an Arizona Rental Property
DSCR equals the property's monthly rent divided by its full monthly payment of principal, interest, taxes, insurance and association dues, so $2,400 of rent against a $2,000 payment is a 1.20 ratio. Pillar Mortgage Group in Scottsdale places DSCR loans down to a 0.75 ratio, and the Phoenix examples below show exactly how the math plays out on a typical home.
Quick facts
- Formula: DSCR = monthly rent divided by monthly PITIA (principal, interest, taxes, insurance, association dues).
- Pillar Mortgage Group places DSCR loans down to a 0.75 ratio, with no tax returns or W-2s (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
- Phoenix typical home value is $404,067 (Zillow Home Value Index, data through September 30, 2026).
- Phoenix average rent is $1,571 a month (Zillow Phoenix rental market data, through September 30, 2026).
- The Freddie Mac 30 year fixed average was 7.32%, a conventional benchmark and not a DSCR quote (Freddie Mac PMMS, week of October 22, 2026).
The DSCR formula
Debt service coverage ratio, or DSCR, measures whether a rental pays for itself. Lenders on investment property loans calculate it with one division:
DSCR = Monthly rent ÷ Monthly PITIA
A ratio of 1.00 means rent exactly covers the payment. Above 1.00, the property produces more rent than the payment on paper. Below 1.00, you cover the shortfall. Pillar Mortgage Group places loans down to 0.75, where rent covers three quarters of the payment (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026). Lenders generally price better as the ratio rises, but exact cutoffs and pricing vary by lender and program.
Note that DSCR on an investment loan is not the same as the net operating income ratio used on commercial property. Most residential DSCR programs use gross rent, not rent after maintenance, vacancy or management, though some programs adjust short-term rental income. Ask which version your lender uses.
What goes into PITIA
| Component | What it is | Arizona notes |
|---|---|---|
| Principal | The part of each payment that pays down the loan | Depends on loan amount and term |
| Interest | The rate charged on the balance | DSCR rates are priced by the lender and the ratio; the benchmark below is conventional |
| Taxes | Annual property tax divided by 12 | Billed by the county treasurer; use the actual parcel bill, not a statewide average |
| Insurance | Hazard or landlord policy premium divided by 12 | Short-term rentals often need a policy written for STR use |
| Association dues | HOA or condo dues, monthly | Common across Phoenix, Gilbert and Chandler planned communities |
Some lenders also include flood insurance or a master condo policy when they apply. If any part is left out of your own spreadsheet, your ratio will look better than the one the lender calculates.
Worked example 1: a typical Phoenix home at average rent
Start with Zillow's Phoenix numbers: a typical home value of $404,067 (Zillow Home Value Index, data through September 30, 2026) and an average rent of $1,571 a month (Zillow Phoenix rental market data, through September 30, 2026). For the interest rate, we use the Freddie Mac 30 year fixed average of 7.32% for the week of October 22, 2026 (Freddie Mac PMMS, week of October 22, 2026). That is a conventional benchmark, used only so the arithmetic has a rate. It is not a DSCR rate quote, and DSCR pricing varies by lender, ratio and borrower.
Taxes of $150 a month and insurance of $125 a month are hypothetical figures chosen for illustration, not Phoenix averages.
| Line | 25% down | 25% down with $75 HOA | 20% down |
|---|---|---|---|
| Purchase price (Zillow typical value) | $404,067 | $404,067 | $404,067 |
| Loan amount | $303,050 | $303,050 | $323,254 |
| Principal and interest at 7.32%, 30 years | $2,081.74 | $2,081.74 | $2,220.53 |
| Taxes (hypothetical) | $150.00 | $150.00 | $150.00 |
| Insurance (hypothetical) | $125.00 | $125.00 | $125.00 |
| HOA | $0.00 | $75.00 | $0.00 |
| Total PITIA | $2,356.74 | $2,431.74 | $2,495.53 |
| Rent (Zillow Phoenix average) | $1,571 | $1,571 | $1,571 |
| DSCR | 0.67 | 0.65 | 0.63 |
At these inputs, a typical Phoenix home renting at the citywide average lands below 0.75. That does not mean Phoenix rentals do not work. It means the citywide averages describe the whole market, not one property, and the deal has to be chosen and structured for the ratio.
Worked example 2: solve for the rent you need
Flip the formula to find the rent that hits a target ratio: required rent = target DSCR times PITIA. Using the $2,356.74 payment from the 25% down column above:
| Target DSCR | Calculation | Rent needed |
|---|---|---|
| 0.75 | 0.75 × $2,356.74 | $1,768 a month |
| 1.00 | 1.00 × $2,356.74 | $2,357 a month |
If the same home leased for a hypothetical $2,000 a month, the ratio would be 2,000 divided by 2,356.74, or 0.85, which clears a 0.75 floor.
Worked example 3: solve for the price that works
You can also hold the rent at Zillow's $1,571 Phoenix average and solve for the loan. At 7.32% over 30 years, every $100,000 borrowed costs about $686.93 a month in principal and interest. Keeping the same $275 of hypothetical taxes and insurance:
| Target DSCR | Max PITIA | Max principal and interest | Max loan | Price at 25% down |
|---|---|---|---|---|
| 0.75 | $2,094.67 | $1,819.67 | $264,898 | about $353,197 |
| 1.00 | $1,571.00 | $1,296.00 | $188,665 | about $251,553 |
Some DSCR programs qualify an interest-only loan on the interest-only payment. On the $303,050 loan in example 1, interest only at the same 7.32% benchmark is $1,848.61 a month, which with $275 of taxes and insurance gives a ratio of about 0.74. Whether interest-only is offered, and how it is qualified, varies by lender and program.
Five ways to raise your ratio
- Put more down. A lower loan amount lowers principal and interest directly.
- Pick a property type or unit that rents above the citywide average, such as a well located small multifamily.
- Shop insurance and check the real tax bill before you write an offer.
- Avoid high HOA dues when the rent is tight.
- Consider short-term rental income where it is legal and permitted, documented the way lenders require. See DSCR loans for Airbnb and short-term rentals in Arizona.
Run your own Arizona numbers
City level rent and value data differ across the Valley and up north. Use our market guides for DSCR loans in Phoenix, DSCR loans in Mesa, DSCR loans in Gilbert, DSCR loans in Chandler, DSCR loans in Tempe, DSCR loans in Sedona and DSCR loans in Flagstaff. To compare this math with conventional qualifying, read DSCR vs conventional investment loans in Arizona. If you already own the rental and want to pull equity, the ratio is recalculated on the new loan, as explained in DSCR cash out refinance in Arizona. Our earlier market analysis, where Phoenix rental numbers work, adds neighborhood context.
Looking for a property to test? Browse listings on Arizona Luxury Property Search, then send the address, expected rent, tax bill and insurance quote to Blake Hermann, Director of Lending. Pillar Mortgage Group shops multiple wholesale DSCR lenders and arranges loan amounts up to $5 million (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026). Visit our DSCR loans page for the full program overview.
Frequently asked questions
How do you calculate DSCR on a rental property?
Divide the property's monthly rent by its monthly PITIA payment, which is principal, interest, property taxes, insurance and any HOA or association dues. For example, $2,400 of rent against a $2,000 payment is a DSCR of 1.20.
What DSCR do I need for a rental loan in Arizona?
Pillar Mortgage Group places DSCR loans down to a 0.75 ratio. A ratio of 1.00 means rent exactly covers the payment. Pricing and exact minimums vary by lender and program.
Does a typical Phoenix home qualify for a DSCR loan?
At Zillow's Phoenix typical home value of $404,067 and average rent of $1,571 through September 30, 2026, with 25% down, the Freddie Mac 7.32% benchmark for October 22, 2026, and hypothetical taxes and insurance of $275 a month, the ratio is about 0.67. The same home would need about $1,768 a month in rent to reach 0.75.
Is the 7.32% rate a DSCR loan rate?
No. 7.32% is the Freddie Mac Primary Mortgage Market Survey 30 year fixed average for the week of October 22, 2026, a conventional benchmark used here only to illustrate the math. DSCR rates vary by lender, ratio and borrower.
Do DSCR lenders use gross rent or net income?
Most residential DSCR programs compare gross monthly rent to the full PITIA payment rather than subtracting maintenance or vacancy, though some programs adjust short-term rental income. The method varies by lender and program.
Sources
- Pillar Mortgage Group, DSCR Loans program page, accessed October 25, 2026. https://pillarmortgagegroup.com/dscr-loans
- Zillow, Phoenix AZ Home Values, Zillow Home Value Index, data through September 30, 2026. https://www.zillow.com/home-values/40326/phoenix-az/
- Zillow, Phoenix AZ Rental Market Trends, average rent, data through September 30, 2026. https://www.zillow.com/rental-manager/market-trends/phoenix-az/
- Freddie Mac, Primary Mortgage Market Survey, 30 year fixed average for the week of October 22, 2026. https://www.freddiemac.com/pmms
Written by Blake Hermann, Director of Lending, NMLS #2271358, Pillar Mortgage Group, Scottsdale, Arizona.
Equal Housing Opportunity. Informational only, not a commitment to lend. Programs subject to change and borrower qualification. Company NMLS #2700076.
