Real estate investors know that smart financing is one of the most important drivers of long-term profitability. Whether you're expanding your portfolio or purchasing your first rental, the structure of your loan matters. That's why many investors turn to DSCR loans: a flexible option that prioritizes property income over personal income verification.
This updated guide breaks down how DSCR loan rates work in 2025, what impacts them, and how you can improve your approval odds and pricing.
A DSCR (or Debt Service Coverage Ratio) loan is a type of financing built specifically for real estate investors. Instead of focusing on employment history or W-2s, lenders evaluate whether the property earns enough to cover its debt payments.
The DSCR itself is calculated by dividing gross rental income by the annual debt obligation. A DSCR above 1.0 indicates the property is generating enough income to cover payments. Most lenders prefer ratios above 1.25, though some will approve loans with a DSCR of 1.1 if other criteria are strong.
As of mid-2025, DSCR loan rates generally range from the mid-6% level to the upper single digits. These rates are higher than conventional mortgage rates by about 1.5 to 2 percentage points, reflecting the added risk and reduced documentation.
Knowing where you fall in this range can significantly impact your investment returns.
DSCR loans can be structured with either fixed or variable rates. Fixed rates provide consistency in monthly payments, ideal for investors who prioritize stability. Variable rates may start lower but can fluctuate, often based on benchmarks like the Secured Overnight Financing Rate (SOFR).
Choose your structure based on your risk tolerance, investment horizon, and projected rental income.
Loan rates are not one-size-fits-all. Location influences pricing because of rental demand, local regulations, and how familiar lenders are with the market. Highly competitive markets often yield better rates because they offer stronger rental comps and more lender competition. In smaller markets, limited lender availability or slower rent growth may result in higher costs.
Understanding what shapes your loan rate helps you present a stronger application. Here are the top factors lenders consider:
A stronger DSCR ratio means a safer investment in the eyes of a lender. Most programs require 1.25 or higher, though 1.1 may be acceptable for borrowers with good credit and strong reserves. The higher the ratio, the more negotiating room you’ll have.
While DSCR loans don’t rely on income verification, credit still matters. Borrowers with scores of 740 or above typically receive the most competitive rates. Anything below 700 may limit your lender options or increase the rate.
The more equity you bring to the table, the better your rate may be. Borrowers are typically required to contribute a down payment of 20% to 25%. Lower LTV means less risk, which translates into pricing benefits.
Single-family long-term rentals often qualify for the best rates. Short-term rentals, multifamily units, and properties in vacation-heavy markets tend to come with higher rates because their income can fluctuate and vacancy risk is elevated.
Experienced borrowers are often eligible for more favorable terms. Investors with multiple successful projects under their belt typically receive better offers than first-time investors.
Every lender has its own model, but most use a base rate—such as SOFR or the 5-Year Treasury Yield—plus a credit spread that reflects the loan’s perceived risk. Factors that influence this include:
This is why comparing offers from multiple lenders is essential.
This type of loan has grown in popularity for a reason: it allows investors to scale portfolios without traditional barriers. Benefits include:
Borrowers do not need to provide W-2s, tax returns, or employment history. Approval is based on the property, not the person.
Less paperwork means quicker approvals. In competitive markets, that time advantage can make all the difference.
Since each property is underwritten separately, DSCR loans make it easier to own multiple rental assets without maxing out personal income thresholds.
Getting the lowest rate takes strategy. Here’s how to improve your position:
Maximize rent, minimize expenses, and document consistent income. A DSCR above 1.25 will always perform better than one barely meeting the minimum.
Pay down revolving debt, resolve any collections, and check for errors in your report. A better score broadens your options.
Lenders specialize in different types of deals. Some prioritize experience, others focus on rental history or property type. Comparing lenders gives you leverage.
Some investors lower their interest rate by paying discount points. You can either pay these at closing or roll them into your loan balance. Be sure to evaluate the long-term financial impact when deciding whether to pay points upfront or roll them into the loan.
Even without income docs, your loan file should include:
The more clarity you provide, the faster your deal can close—and the better your pricing may be.
Traditional mortgages require full documentation and are priced based on personal income. That excludes many real estate investors who rely on rental cash flow. DSCR loans serve as an alternative for investors who do not meet traditional documentation requirements.
In May 2025, conventional mortgage rates hovered around 6.90%. DSCR loans may run 1.5 to 2 points higher but offer speed and flexibility in return.
Most lenders prefer a DSCR of 1.25 or higher. Some may approve deals at 1.1 if other factors, like credit and reserves, are solid.
Borrowers are typically required to contribute a down payment of 20% to 25%. Lower LTVs often mean better rates.
Yes, though rates and terms may be more conservative for new borrowers. A solid application can help overcome limited experience.
They can qualify, although pricing is often higher because income tends to vary more than with long-term rentals. A strong occupancy history helps support your case.
Whether you're refinancing an existing rental or acquiring a new one, understanding how DSCR loan rates work helps you make more strategic decisions. By improving your borrower profile and comparing lenders, you can unlock better pricing and scale your portfolio with confidence.
Have questions or want to see what's possible for your next deal? Get in touch with our team to discuss your financing options.