DSCR loans are priced and structured by non-QM lenders, not agencies. The product is not standardized. Lenders compete on rate, minimum DSCR ratio, eligible property types, and prepayment structures. Knowing what separates lenders in this space helps you place each deal with the lender that prices it best.
Minimum DSCR Requirements
Most DSCR lenders require a minimum DSCR of 1.0, meaning the monthly rental income equals or exceeds the PITIA payment. Some lenders go below 1.0 to 0.75 or even no-ratio DSCR for strong FICO and LTV combinations. Below-1.0 DSCR products carry pricing premiums and tighter LTV caps (typically 65-70% max).
Property Type Eligibility Differences
- ✦Short-term rental (STR) income: some lenders use Airbnb or VRBO actual revenue, others require conversion to long-term equivalent rent
- ✦Condotels and resort condos: most DSCR lenders exclude these entirely; a minority offers them at higher rates
- ✦Rural and agricultural properties: often excluded from standard DSCR programs
- ✦2-4 unit properties: most lenders allow; DSCR is calculated on total rent vs. full PITIA
- ✦5+ unit commercial: almost no DSCR lender; goes to commercial bridge or CMBS
Prepayment Penalty Structures
DSCR loans typically carry prepayment penalties of 3 to 5 years. Step-down structures are common: 5-4-3-2-1 or 3-2-1. Some lenders offer a no-prepay option at a rate premium of 50-75 bps. Investors who plan to sell or refinance within the penalty period need to factor the prepayment cost into their analysis. Always disclose the prepay structure prominently.
Rate Drivers on DSCR
- ✦FICO: every 20-point band from 660 to 780+ affects pricing by 25-50 bps
- ✦LTV: 75% vs. 70% vs. 65% LTV tiers are common pricing breakpoints
- ✦DSCR ratio: 1.25+ DSCR often qualifies for the best pricing tier
- ✦Property type: STR, condo, and rural all carry add-ons vs. single-family long-term rental
- ✦Loan amount: lower loan amounts often carry higher per-unit pricing
Aria tracks DSCR lender programs, minimum DSCR requirements, and eligible property types so you can match any investment property deal to the right lender. Ask at vicariointel.com.
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