If you’re exploring DSCR loans (Debt Service Coverage Ratio loans), you’ve probably asked yourself: “What are DSCR loan rates, and how are they determined?”
Unlike conventional loans, DSCR loan rates vary widely depending on multiple risk factors. Understanding these variables can help you position yourself for the best terms possible.

Below are the seven main factors lenders use to calculate your DSCR interest rate—and how each one impacts what you’ll pay.

Here are the 7 Essential Factors Lenders Use to Calculate Your DSCR Interest Rate

1. Loan-to-Value (LTV) Ratio

What it is: Your LTV compares the property’s appraised value to your loan amount.
Example: If your property is worth $200,000 and you borrow $150,000, your LTV is 75%.

Why it matters: The closer you get to 100% LTV, the higher the risk for lenders—resulting in higher interest rates.

• Most lenders cap purchases at 80% LTV.

• Some will go to 85% LTV if your credit score is 720+.

• Your credit score also influences your required down payment.

2. Credit Score

What it is: A numeric measure of your creditworthiness.

Why it matters:

• Minimum credit scores for DSCR loans can be as low as 600, but you’ll likely need a larger down payment (around 35%).

• A score of 680+ often qualifies you for just 20% down and better rates.
  Higher scores = less perceived risk = lower DSCR loan rates.

3. Loan Purpose

What it is: Whether you’re buying, refinancing, or doing a cash-out refinance.

Why it matters:

• Rate & term refinances usually get better rates than purchases.

• Cash-out refinances typically have higher rates because the lender is giving you extra cash, increasing their risk.

4. Property Type

What it is: The category of the investment property.

Why it matters:

• Single-family homes generally have the lowest DSCR rates.

• Multifamily, condos, or townhomes may have slightly higher rates due to maintenance, tenant turnover, or HOA concerns. Risk varies based on property type, so your rate will too.

5. Prepayment Penalty

What it is: A fee charged if you pay off your loan early.

Why it matters:

• Many DSCR loans have prepayment penalties from 0 to 5 years.

• The longer the penalty term, the better the rate—because the lender has guaranteed income for longer. Always balance rate savings against the flexibility you may lose.

6. Experience Level

What it is: Your history as a real estate investor.

Why it matters:

• Lenders may define “experienced” as having active rentals or flipping at least 3 properties in the last 18 months.

• Experienced investors often get better DSCR loan rates.

• First-timers can still qualify but may see a small rate bump.

7. DSCR Ratio

What it is: The ratio of your property’s rental income to its housing payment (PITI + HOA).

Why it matters:

• A 1.0 DSCR means rent exactly covers the mortgage payment.

• Higher DSCR ratios (like 1.5) show stronger income coverage and can earn you better rates.

• Some lenders still approve loans with DSCRs under 1.0 if future appreciation or rent increases are likely.

Bringing It All Together

Your DSCR loan rate is essentially your par rate—the base rate you’d pay with no extra discount points. You can adjust it by paying discount points upfront to “buy down” your rate, depending on your strategy and investment goals.

Final Takeaway

If you want the most competitive DSCR loan rates, focus on lowering your risk profile:

• Improve your credit score

• Increase your down payment

• Target properties with strong rental income

• Leverage your investor experience

A skilled mortgage broker can help you navigate these factors, present your strongest application, and find the lender that matches your goals.

If you’re ready to run your own numbers and see where you stand, reach out today—we’ll walk through your options and see how to secure the best DSCR loan rate possible.