Insurance is part of your DSCR payment calculation — here's why that matters more in Florida than most states.
By Ryan Kennedy, NMLS #1434300 · Orlando Mortgage Broker, Icon Mortgage Group
Florida property insurance has been a moving target in recent years, and because insurance is baked directly into the DSCR calculation, it deserves more attention than investors sometimes give it.
Remember that DSCR compares rental income to PITIA — Principal, Interest, Taxes, Insurance, and Association dues. A higher insurance premium directly increases the payment side of that equation, which can pull the DSCR ratio down even if nothing else about the deal has changed.
Florida's exposure to hurricanes and other severe weather has made property insurance markets more volatile than in many other states, with premiums that can vary significantly by property age, construction type, roof age/condition, flood zone, and carrier — sometimes by a wide margin between quotes for the same property.
A property used as a short-term rental may need a landlord or short-term-rental-specific policy rather than a standard homeowner's policy, and pricing/availability for that type of coverage can differ from a standard owner-occupied policy.
Relying on a rough insurance estimate instead of an actual quote is one of the more common reasons a DSCR deal that looked fine on paper runs into trouble at underwriting. Getting a real quote from an insurance agent before finalizing your offer gives you (and us) an accurate number to underwrite against from the start.
If a higher-than-expected insurance quote pulls your DSCR down, options can include increasing the down payment, shopping additional insurance carriers, evaluating flood zone or roof-related mitigation credits, or reconsidering the specific property relative to its total carrying costs.