Excerpt from: Commercial Real Estate Loan Tips
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| June 08, 2005 | | The Custom is to Express the DSCR to One-Hundredths | In commercial mortgage underwriting, the debt service coverage ratio (DSCR) is customarily computed to two places to the right of the decimal point.
In other words, a debt service coverage ratio of 1.346 would be rounded to 1.35. A debt service coverage ratio of 1.1 is customarily expressed as 1.10.
Interestingly, a breakeven cash flow is customarily shown on the Executive Loan Summary as 1.0 - notwithstanding the custom to express a DSCR to two places to the right of the decimal point.
One of our new loan officers recently expressed a DSCR as one-point-twenty-seven. Oops. Busted. She just revealed to her lender that she is a rookie. She should have said one-point-two-seven.
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