Finance
A debt service coverage ratio (DSCR) of 1.25 means:
AThe property generates 25% less income than the debt service
BThe NOI is 1.25 times the annual debt service (mortgage payment)✓ Correct
CThe property has 25% negative cash flow
DThe loan-to-value is 1.25 to 1
Explanation
DSCR = NOI ÷ Debt Service. A DSCR of 1.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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