The first question most investors ask after they understand how DSCR works is: what rate am I going to get? It is a fair question, and the honest answer is that it depends on a handful of factors -- some you can control and some you cannot. Nothing about DSCR pricing is random. Every adjustment to your rate has a reason behind it, and once you understand those reasons, you can structure your deal to get the best pricing available to you.
Why DSCR rates start higher than conventional rates.
DSCR loans are non-QM products, which means they fall outside the Qualified Mortgage guidelines that govern conventional lending. They are typically held on balance sheet by the lender or sold into non-agency mortgage-backed securities, rather than being sold to Fannie Mae or Freddie Mac. The capital behind them is more expensive, and lenders price accordingly.
Expect DSCR rates to run roughly 0.5 to 1.25 percentage points above a comparable conventional rate on any given day. The spread is not a penalty. It is the cost of getting a loan approved without income documentation, W-2s, or tax returns -- a risk-based decision by the investors providing the capital.
The factors that adjust your rate.
Think of DSCR pricing as a starting point that gets adjusted up or down based on the risk profile of your specific loan. These are the primary adjusters.
Credit score. This is the single largest rate driver. DSCR lenders typically price in tiers: 620--659, 660--679, 680--699, 700--719, 720--739, and 740+. Each tier step up generally improves your rate. The biggest single jump is usually from below 720 to 720 and above. If your score is sitting at 718, it is worth spending time on improvement. Two points can mean a meaningful difference in your rate for the life of the loan. One of the fastest scoring moves is removing authorized users on credit cards, and paying down revolving balances before pulling credit.
Loan-to-value (LTV). How much you are putting down directly affects your rate. At 75% LTV (25% down), you access the best rate tiers most lenders offer. At 80% LTV (20% down), you are still in solid territory. At 85% LTV (15% down), you will see meaningful rate adjustments. The premium at 85% LTV can be substantial enough that putting another 5% down makes the deal pencil significantly better over the hold period.
DSCR ratio. A property that covers its payment more comfortably is a lower-risk loan. A DSCR of 1.25 or higher typically prices better than a deal sitting right at 1.0. Some lenders have tiered pricing for ratios above 1.25, above 1.5, and so on. If your deal is borderline, run the numbers at different rent assumptions to see how the ratio affects pricing.
Property type. Single-family residences price the best. Condos may carry a small adjustment depending on the project. Short-term rentals typically carry an additional rate premium of 0.125% to 0.25% over a comparable long-term rental deal. Multi-family pricing varies by lender and unit count.
Prepayment penalty election. This is covered in detail in Post 02 of this series. The key point: electing a prepayment penalty is the most direct lever you have for improving your rate. A 3-year step-down PPP often improves your rate by 0.25% or more compared to a no-PPP option. If you plan to hold the property for three or more years, taking a PPP is usually the right call on rate.
| Factor | Better Pricing | Worse Pricing |
|---|---|---|
| Credit Score | 740+ | Below 680 |
| LTV | 75% (25% down) | 85% (15% down) |
| DSCR Ratio | 1.25 or higher | At or below 1.0 |
| Property Type | Single-family LTR | STR, condo, multi-family |
| Prepayment Penalty | 3- or 5-year PPP elected | No PPP |
What you can control.
To summarize the levers that are actually in your hands before you go to the lender:
- Know your credit score before you shop. If it is close to a pricing tier cutoff, focused work -- paying down revolving balances, disputing errors, avoiding new inquiries -- can move you into the next tier and meaningfully improve your rate.
- Put 25% down if you can. The rate improvement from 80% to 75% LTV is usually worth it, especially on a loan you plan to hold long-term.
- Elect a prepayment penalty if your hold horizon allows it. Most buy-and-hold investors are well-served by a 3- or 5-year PPP. The rate reduction usually more than offsets the flexibility you give up.
- Shop multiple lenders. DSCR pricing is not standardized the way conventional rates are. Two lenders looking at the same loan file can offer materially different rates. A mortgage broker who works with multiple non-QM investors will have access to a broader range of programs and pricing than a single retail lender.
What a DSCR rate actually looks like.
Rates move daily, so specific numbers posted here would be outdated the moment you read them. The useful framework: on a typical deal, a well-qualified borrower (740+ credit, 75% LTV, 1.25 DSCR, single-family long-term rental, 3-year PPP) can expect a rate that reflects the broader interest rate environment plus roughly 0.5 to 1.0 percentage points. If conventional rates are currently hovering at 7.0%, plan for roughly 7.5% to 8.0% on a well-structured DSCR deal. A borrower at the lower end of the credit and LTV range will see higher pricing.
Points vs. rate: the buydown decision.
Most DSCR programs allow you to buy the rate down by paying discount points at closing. One point equals 1% of the loan amount. Whether it makes sense depends entirely on your hold period. If you plan to hold the property for seven or more years, buying the rate down at closing often pencils well. If there is any chance you refinance or sell within three to four years, paying points to lower the rate likely does not recover its cost.
Run your deal through the Deal Analyzer first.
Plug in your purchase price, expected rent, and a rate in the range above to see how the deal performs at different price points before you go under contract.
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