DSCR rates are not one number. Two investors can apply the same week and get rates half a point or more apart, because the rate is built from a handful of factors. Know them and you can move your own rate before you apply.
What moves a DSCR rate
- The ratio. A 1.25 DSCR prices better than a 1.00, and a ratio under 1.00 costs more or needs more down. See DSCR 1.25 vs 1.0.
- Credit score. Each step up in score usually shaves the rate. 620 is our minimum.
- Leverage. 75% of value prices better than 80%.
- Loan size. Very small loans often carry a higher rate because the fixed costs of the loan are the same.
- Prepayment term. A 5 year step down penalty usually prices lower than 3 years or 1 year. Here is how the step down works.
- Points. Paying points buys the rate down. Whether it pays off depends on how long you keep the loan. Work the buydown break even.
- Property type. A 2 to 4 unit can price slightly differently from a single family home.
What half a point means on a real loan
On a $240,000 loan with a 30 year schedule:
| Rate | Principal and interest per month | Per year |
|---|---|---|
| 6.25% | $1,478 | $17,733 |
| 6.75% | $1,557 | $18,680 |
| 7.25% | $1,637 | $19,647 |
Half a point is roughly $79 a month here, and it also moves your ratio, since the payment is the bottom of the DSCR fraction. That is why rate and ratio have to be solved together. The DSCR calculator lets you try different rates against your rent.
Closing costs are part of the price
Compare offers on rate, points and fees together, not rate alone. See DSCR loan closing costs and fees for what a typical closing statement includes.
Our DSCR program
30 year fixed options start at 6.25% for strong files.
- Up to 80% of the property's value
- Qualifies on the rent, with no tax returns, W-2s or pay stubs
- 620 minimum credit score
- Single family and 2 to 4 unit rentals on long term leases
- Closes in an LLC
- 30 year fixed options and step down prepayment choices
- Closings in about 21 to 30 days once conditions are met
Send us the deal and we will price it on your actual numbers.
Frequently asked questions
What is the rate on a DSCR loan?
Our 30 year fixed DSCR options start at 6.25% for strong files. Your rate depends on the ratio, credit score, leverage, loan size and prepayment term.
Why are DSCR rates higher than conventional rates?
A DSCR loan skips income verification and is made to an LLC on an investment property, so lenders price in more risk than on an owner occupied conventional loan.
Does a prepayment penalty lower my rate?
Usually yes. A longer step down prepayment term, such as 5 years, typically prices lower than a 1 year term or no penalty.
Should I pay points to lower the rate?
Only if you will hold the loan long enough to earn the points back. Work the break even first.
Rates and terms change with the market and depend on the full file. Example payments are for illustration only.