A DSCR loan's rate gets all the attention, but the number that decides whether the deal works on closing day is the cash you have to bring. On a typical DSCR purchase or refinance, closing costs land in the low to mid single digit percentages of the loan amount before any escrow deposits, and a meaningful share of that total has nothing to do with the lender at all. It goes to the title company, the appraiser, the insurer, and the county.
Here is every line, what drives it, and which ones you can actually move.
The lender side
Origination points. This is the lender's fee, quoted as a percentage of the loan amount, and it is the single largest lender line on most files. Our DSCR program starts at zero points, which matters more than it sounds like, because points and rate trade against each other. Buying the rate down costs points now. Taking a higher rate costs you every month for thirty years. Which one wins depends entirely on how long you will hold the loan, and we worked that trade all the way through on the flip side in points versus rate on a flip loan. The same arithmetic applies here, except the hold is measured in years rather than months, which usually pushes the answer toward buying the rate down.
Underwriting, processing, and document fees. Flat dollar amounts, generally the smallest meaningful line on the file, and they do not scale with loan size.
The appraisal. On a DSCR loan the appraisal usually does double duty. It establishes value, and it establishes market rent, most often through a rent schedule form completed alongside the value opinion. That rent figure feeds straight into your qualifying ratio, so this is not a box to check, it is an input to whether the loan approves. Multi unit and rural properties cost more and take longer than a standard single family in a dense suburb.
The title and settlement side
This is where most investors underestimate the total, because these fees do not belong to the lender and do not appear on a rate sheet.
- Lender's title insurance policy. Priced off the loan amount, required on every loan, and in most states the single largest third party line.
- Owner's title policy. On a purchase, optional in the sense that nobody forces you, and a bad thing to skip on an investment property you intend to hold for decades.
- Settlement or closing fee. The title company's charge for conducting the closing.
- Title search and examination. Pulling and reading the chain of title, liens, and judgments.
- Recording fees and transfer or mortgage taxes. Set by the county and the state, not negotiable, and wildly different between states. Some states tax the mortgage itself. This line alone can swing a closing statement by thousands, so if you invest across state lines, get a real quote before you model the deal.
- Survey, when required.
Title fees vary by company more than most investors assume. On a purchase where you have the right to choose, getting two quotes is worth the twenty minutes.
Insurance and escrows, the part that is not a fee at all
Prepaids and escrow deposits are usually the biggest single block of cash at a DSCR closing, and they are the block investors forget when they budget, because they are not costs. They are your own money moved forward.
The insurance premium. A landlord or dwelling fire policy, typically paid twelve months in advance at closing. If the property is in a flood zone, add the flood policy, and add the fact that a flood determination can change the deal economics after you are already under contract.
The escrow deposit. Several months of taxes and insurance collected up front to seed the escrow account, plus prepaid interest from the closing date to the end of the month. A closing on the third of the month costs you almost a full month of prepaid interest. A closing on the twenty eighth costs you almost none. That is a free few hundred dollars for choosing a date.
The entity side
Every DSCR loan closes in an entity, which means the LLC has to exist and be in good standing before the file can close. Formation costs are state driven and modest, but two things reliably delay closings. Registered agent service, and foreign qualification when your LLC is formed in one state and the property sits in another. Some lenders also want an entity opinion letter or certificate of good standing. None of it is expensive, and all of it is slow if you start it in the last week. We laid out the sequence in why DSCR loans require an LLC, including how to handle a property already sitting in your personal name.
The cost that does not appear on the closing statement
The prepayment penalty. DSCR loans carry one, and ours is offered as a step down over five, three, or one year. It costs nothing at closing and everything if you sell in year two.
Pick the term against your actual plan, not your optimism. If this is a long term hold in a market you like, a five year step down is usually the cheapest total cost because it buys you a better rate. If there is any real chance you sell or refinance inside two or three years, the shorter step down earns its price the first time you use it. The mistake is choosing the longest term for the rate benefit and then paying to exit.
How to lower the total, in order of what actually works
- Close late in the month. Costs nothing, saves prepaid interest.
- Shop title where you can choose. Real spread between companies, same product.
- Model points against your hold period. On a thirty year fixed you intend to keep, paying points is often correct. On a bridge to a sale in two years, it rarely is.
- Get the insurance quote early. Underinsuring to save premium fails underwriting, and a late flood determination blows up the timeline.
- Have the entity ready before you apply. Delay is a real cost when you are paying hard money interest while you wait.
- Do not borrow more than the property carries. Higher leverage means a lower ratio, and a ratio that lands under 1.0x does not qualify at any price.
Purchase versus refinance, because they are not the same closing
The line items overlap, but the cash behaves differently, and investors who have only done one are routinely surprised by the other.
On a purchase, closing costs stack on top of your down payment. At 80% LTV you are already bringing 20% of the price, and the fees, prepaids, and escrows land on top of that, not inside it. Budget the down payment and the closing costs as two separate numbers or you will be short at the table.
On a refinance, costs generally come out of the loan proceeds rather than out of pocket, which feels free and is not. Every dollar of cost financed is a dollar you do not receive, and on a cash out refinance it comes directly out of the capital you were trying to recover. It also raises your loan amount slightly, which raises your PITIA, which nudges your ratio down. On a deal that is already close to the qualifying line, financed closing costs are exactly what pushes it under.
There is one more difference worth planning around. A refinance of a property you just rehabbed depends on the appraiser using the improved value rather than what you paid, and lenders have rules about how long you must own the property before that is allowed. If your model assumes the new value, confirm that assumption before you order anything.
Where to put this in your model
Build closing costs into your acquisition or refinance number from the beginning rather than treating them as a surprise at the end. On a BRRRR in particular, closing costs on the refinance are the difference between pulling all your capital back out and leaving five figures in the deal. Our walkthrough of the hard money to DSCR handoff shows where that leakage happens.
Then confirm the deal still clears on ratio, not just on price. The formula, the rent side, the PITIA side, and what to do when it comes in short are all in how to calculate DSCR on a rental property. Terms quoted here reflect our published DSCR program, currently thirty year fixed, up to 80% LTV, $75K minimum loan amount, 620 minimum FICO, points from 0%, with 5/3/1 step down prepayment options. Rates and program terms move, so confirm the current numbers on the product page or with us before you model a specific deal.