I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I walk California investors through DSCR calculations before they make offers — understanding the math tells you whether a property will qualify before you spend money on inspections and appraisals. Call (800) 239-1103 for a free DSCR analysis on any California property.
The DSCR formula is simple; the California-specific inputs are where it gets interesting.
The DSCR Formula
DSCR = Gross Monthly Rent ÷ Monthly PITIA
Where PITIA = Principal + Interest + Taxes + Insurance + HOA (if applicable)
Step-by-Step DSCR Calculation
Step 1 — Establish the Monthly Rent
The lender uses the appraiser’s market rent estimate (from Form 1007 or 1025), not what you hope to charge. The appraiser surveys comparable rentals in the market and determines a supportable market rent. If you already have a lease in place, the lender will use the lesser of the lease rent or market rent.
Step 2 — Calculate Monthly PITIA
Your lender calculates this based on loan amount, rate, term, estimated taxes, insurance, and HOA. Example for a $600,000 loan at 7.50% on a 30-year term in Sacramento County:
| Component | Monthly Amount |
|---|---|
| Principal & Interest | $4,196 |
| Property Taxes (1.2% annual) | $800 |
| Homeowners Insurance | $150 |
| HOA | $0 |
| Total PITIA | $5,146 |
Step 3 — Divide and Interpret
If the appraiser establishes a market rent of $3,200/month: DSCR = $3,200 ÷ $5,146 = 0.62 — this doesn’t qualify at standard programs. You’d need either a larger down payment, a lower rate, or a no-ratio DSCR program.
If the market rent is $5,500/month: DSCR = $5,500 ÷ $5,146 = 1.07 — this qualifies at most DSCR programs.
DSCR by California Market (2026 Examples)
| Market | Typical SFR Price | Market Rent | 25% Down / 7.50% | Est. DSCR |
|---|---|---|---|---|
| Sacramento | $480,000 | $2,400 | $3,870 | 0.62 ⚠️ |
| Fresno | $340,000 | $1,950 | $2,740 | 0.71 ⚠️ |
| Bakersfield | $290,000 | $1,800 | $2,337 | 0.77 (no-ratio) |
| Riverside | $520,000 | $2,800 | $4,193 | 0.67 ⚠️ |
| Stockton | $380,000 | $2,100 | $3,065 | 0.69 ⚠️ |
| Oakland (3bd) | $700,000 | $3,800 | $5,645 | 0.67 ⚠️ |
| Palm Springs STR | $650,000 | $5,800 (AirDNA) | $5,243 | 1.11 ✅ |
| Lake Tahoe STR | $950,000 | $8,500 (AirDNA) | $7,660 | 1.11 ✅ |
This table illustrates why short-term rental DSCR often works where long-term DSCR doesn’t — STR income is typically 2–4× higher than long-term rent in vacation markets.
How to Improve Your DSCR Before Applying
- Put more down (reduces loan amount → lower PITIA)
- Use a 40-year IO loan to reduce monthly payment
- Target STR markets where AirDNA income is 2–3× long-term rent
- Look for multifamily (2–4 units) where combined rent produces stronger DSCR
- Use a seller-paid buydown to reduce your rate
Frequently Asked Questions
What DSCR do I need to qualify for a California investment property loan?
Most DSCR lenders require a minimum of 1.0 — meaning rent must equal or exceed PITIA. Some lenders approve at 0.75–0.99 with a higher rate or additional reserves. No-ratio DSCR programs (which don’t calculate DSCR at all) are available for properties where rent doesn’t cover the payment, typically requiring 30–40% down. Short-term rental markets often achieve DSCR above 1.2 using AirDNA projected income, which lenders increasingly accept as documentation.
Does the lender use actual rent or market rent to calculate DSCR?
The lender uses the lesser of your actual signed lease rent or the market rent established by the appraiser’s Form 1007 (single family) or Form 1025 (2–4 unit). If a property is vacant, only the market rent appraisal figure is used. If you have a lease above market rent, the lender caps the income at appraised market rent. This is why understanding your specific appraised market rent before applying matters — it determines whether your deal qualifies at standard DSCR programs or needs an alternative structure.
Can I use short-term rental (Airbnb) income to qualify for a DSCR loan in California?
Yes, a growing number of DSCR lenders accept AirDNA or Mashvisor STR income projections for properties in vacation markets. Eligible STR markets in California include Palm Springs/Coachella Valley, Lake Tahoe, Big Bear, and coastal towns with high nightly rates. Some lenders require an active STR permit from the municipality and documentation of current or historical STR income. STR DSCR loans are particularly useful in markets where long-term rental income doesn’t cover the mortgage payment but STR income does.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
