Learn
Nobody can quote you a DSCR rate from a web page, and any site that publishes one number is showing you their best-case scenario. What we can do is show you exactly how the rate is built, so you can see which of your own inputs is costing you the most.
How pricing works
- A base rate is set by capital markets, not by any individual lender
- Adjustments stack on top for FICO, LTV, DSCR band, property type, and purpose
- Points buy the rate down; prepayment penalty terms buy it down further
- Two borrowers on the same property routinely land 150 bps apart
The stack
Think of your rate as a base plus a series of adjustments, each expressed in basis points. One basis point is one hundredth of a percent; 25 bps is a quarter point.
| Factor | Typical adjustment |
|---|---|
| FICO 760+ | −12.5 to −25 bps |
| FICO 720–759 | Baseline |
| FICO 680–719 | +25 to +50 bps |
| FICO 620–679 | +75 to +175 bps |
| LTV 65% or below | −12.5 to −25 bps |
| LTV 75% | Baseline |
| LTV 80% | +25 to +50 bps |
| DSCR 1.25+ | Baseline |
| DSCR 1.00–1.09 | +12.5 to +25 bps |
| DSCR 0.75–0.99 | +37.5 to +75 bps |
| No-ratio | +50 to +100 bps |
| Cash-out refinance | +25 to +50 bps |
| Short-term rental | +25 to +50 bps |
| 2–4 unit | +12.5 to +25 bps |
| Non-warrantable condo / condotel | +50 to +100 bps |
| Foreign national | +75 to +150 bps |
| No prepayment penalty | +50 to +125 bps |
| Loan under $150,000 | +25 to +75 bps |
These adjustments compound. A 690-score borrower taking 80% leverage on a cash-out of a non-warrantable condo at 1.02 DSCR is stacking five separate hits and will land well over two points above a clean file. Nothing unusual has happened — the pricing engine simply added up.
Where DSCR sits against conventional
DSCR is generally 50 to 150 basis points above a conventional investment-property loan. The gap is narrower than the headline suggests, because conventional investment property carries its own loan-level price adjustments for occupancy, LTV, and credit — on some files, particularly at higher leverage or lower scores, the all-in comparison is close to a wash. The right comparison is your actual conventional quote against your actual DSCR quote, not a headline rate against a headline rate. See DSCR vs conventional.
Prepayment penalties are a pricing lever
Most DSCR notes carry a prepayment penalty, and accepting a longer one buys you a lower rate. The common structures:
| Structure | How it works | Rate effect |
|---|---|---|
| 5-4-3-2-1 step-down | 5% of balance in year one, declining to 1% in year five | Lowest rate |
| 3-2-1 step-down | 3% year one, 2% year two, 1% year three | +12.5 to +25 bps |
| Flat 3% for 3 years | 3% of balance any time in the first three years | +12.5 to +25 bps |
| 6 months interest | Penalty equals six months of interest | Varies |
| None | Free to sell or refinance any time | +50 to +125 bps |
Several states restrict prepayment penalties on 1–4 unit investor loans, including Illinois, Minnesota, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, and Vermont. In those states you generally receive no-penalty pricing whether or not you wanted it.
Points, and whether to pay them
One point is 1% of the loan amount and typically buys 25 basis points. On a $350,000 loan that is $3,500 to save roughly $58 a month — a break-even around 60 months. Pay points only if you are confident of holding past break-even, which on a property you might refinance in three years usually means you should not.
Getting your best number
- Work your score before the pull. Paying revolving balances under 30% utilization moves many borrowers a full tier. It is the cheapest 25 to 50 basis points available.
- Take 75% rather than 80% if you can. The last 5% of leverage frequently costs more than it is worth.
- Improve the ratio structurally. Interest-only or a 40-year term can move a DSCR band, and the band adjustment often exceeds the structural cost.
- Quote insurance early. A high binder raises PITIA, lowers DSCR, and can push you into a worse pricing band days before closing.
- Compare complete quotes. Rate, points, origination, prepayment structure, and rate-lock length together. A lower rate with two points and a five-year penalty is frequently the more expensive loan.
Get an actual quote
Real pricing on your file, with the adjustments itemized so you can see what each one costs. No credit pull to get a term sheet.
Get a term sheet Call (914) 266-0725Adjustment ranges shown are illustrative of common market practice and are not a rate sheet, a quote, or an offer. Pricing changes daily and varies by lender, state, and file. Not a loan commitment.