For an LTR loan, the Debt Service Coverage Ratio (DSCR) is used rather than the DTI ratio. The broad definition of “debt service” is the cash that is required to cover repaying interest and principal for a debt during a set period of time. Borrowers and lenders use DSCR to measure the ability to repay the annual debt service compared to the net operating income generated by the property. Calculating the debt service coverage ratio helps to estimate how much an investment property can rent for to help predict the property’s value. To calculate it, divide the net operating income of the property you want to finance by the total debt service. Net operating income is the revenue minus certain operating expenses. Debt servicing is the cash that is required to cover repaying interest and principal for a debt during a set period of time. A larger DSCR means there is more income to service the debt, making it more likely you’ll qualify for the financing you want.