Why are DSCR loan rates higher, and what affects my rate?
The short answer
DSCR loan rates are usually higher than conventional investment loans because the loans can't be sold to Fannie Mae or Freddie Mac and they skip personal income verification. Your rate mainly depends on your credit score, down payment, the property's ratio, the prepayment penalty you choose, and the property type. The Mortgage Advisory shows you how each of those moves your rate, so you can decide what's worth paying for.
Why do DSCR loans cost more?
- They're Non-QM loans, so they're held or sold to private investors instead of Fannie Mae or Freddie Mac
- The lender is relying on the property's rent, not your personal income
- They're investment properties, which carry more risk than the home you live in
What moves my rate the most?
| Factor | Lower rate | Higher rate |
|---|---|---|
| Credit score | 740+ | Below 680 |
| Down payment | 25%+ | 20% or less |
| DSCR ratio | 1.25+ | Below 1.0 |
| Prepayment penalty | Longer (for example 5 years) | Shorter or none |
| Property | Single-family, long-term rental | Short-term rental, condo, 2 to 4 units |
| Loan size | Mid-size | Very small or very large |
| Payment type | Fully amortizing | Interest-only |
Can I buy the rate down?
Yes. You can pay discount points at closing to lower your rate. Whether it's worth it depends on how long you'll keep the loan. I'll show you the break-even month.
Why don't you list DSCR rates on the site?
Because a real rate depends on all the factors above, and rates move daily. A posted number would be misleading for most people. Call or chat for today's rates and I'll price your actual scenario.
Our take
Don't shop DSCR loans on the lowest advertised rate. Compare the full picture: rate, points, prepayment penalty, and closing costs. That's where the real difference between lenders shows up.
Ace Ausar, Mortgage Banker · NMLS #1143018
The Mortgage Advisory, Inc. · NMLS #1549739
Reviewed by Ace Ausar, NMLS #1143018 · Updated
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