DSCR Loan Interest Rates Today [April, 2024]

Amresh Singh, CEO - HomeAbroad  by Amresh Singh
14 min read
DSCR Loan Interest Rates

As of [Jan 2, 2024], DSCR loan interest rates range from 7.50% to 8.50%, with variations depending on lender-specific terms and individual borrower profiles.


In real estate investing, even the slightest fluctuation in DSCR loan interest rates can have a significant impact on your portfolio’s returns. Staying ahead in this competitive market means more than just being aware of the latest DSCR loan interest rates; it demands a deep understanding of what drives these changes and how to leverage them to secure the best terms.

This article goes beyond just presenting current DSCR loan rates. It dives into the factors that shape DSCR loan interest rates, offering insights into how you, as an investor, can navigate these waters to optimize your investment decisions.

Current DSCR Loan Interest Rates [April, 2024]

As of Jan 2, 2024, the starting average DSCR loan interest rate is 7.50%, assuming ideal conditions such as a good DSCR ratio, favorable LTV, and strong credit score. This rate is just the baseline and can be lower or higher than this depending upon the lender’s loan program features and borrower’s profile.

Average DSCR loan interest rates 2023 - Month-over-Month graph

This starting DSCR loan interest rate is a general estimation based on 30-year fixed conventional mortgage rates. Typically, DSCR loan rates are set 0.9%-1.5% higher than these conventional rates, reflecting the additional risk undertaken by lenders in these loan programs. 

It is crucial to note that the US Treasury yield curve strongly indicates that mortgage rates, including those for DSCR loans, will remain at a high level until the Federal Reserve successfully controls inflation and puts a halt to the increasing Fed Funds Rate. This high DSCR loan interest rate trend in recent months understandably leaves many real estate investors wondering whether it’s wiser to wait or proceed with their investment plans. 

Based on my extensive experience in the mortgage industry and current market conditions, my advice for real estate investors is to move forward even with higher rates, personifying the popular saying these days– “marry the house, date the rate”. 

The current low inventory and supply shortage, balanced against high interest rates, create a unique opportunity. 

While these rates are keeping a check on property prices now, a future decrease in rates is likely to unleash pent-up demand, escalating prices. 

This is further supported by our internal research and market survey of real estate professionals. We conducted a survey among our network of real estate experts, agents, and lenders to gauge market sentiment. Here are the results: 

Poll on Mortgage rates in the US

43.1% of the respondents said “yes”, i.e. prices will go up when rates drop. 29.8% of respondents said “no”, waiting for rates to drop, and lastly, 23.3% said “no”, we are in a recession. 

Additionally, in another poll about future interest rate trends, approximately 85% of respondents do not foresee rates returning to their former lows in the near future. 

Poll on mortgage trends in the US

This data, coupled with a broader analysis of current real estate market trends, suggests that investing now might be a wise strategy to secure properties at more favorable prices. 

This window of opportunity presents a compelling case for astute investments today, with the potential to refinance at lower rates in the future. 

Here’s our opinion to help you make a decision on whether you should wait or buy, given high DSCR loan interest rates: 

  • 𝗠𝗮𝗿𝗿𝘆 𝘁𝗵𝗲 𝗵𝗼𝘂𝘀𝗲, 𝗱𝗮𝘁𝗲 𝘁𝗵𝗲 𝗿𝗮𝘁𝗲: Even though the interest might sting a bit, think of the equity you’ll be building as house prices soar, and the loan you’ll be paying down. Don’t forget, you can always refinance when the rates decide to take a dip! 
     
  • 𝗟𝗲𝘀𝘀 𝗶𝘀 𝗺𝗼𝗿𝗲: With high rates, there’s lesser competition. This means more choices for you and possibly a better price tag! No more elbowing through crowds or outbidding others; high rates thin out the herd and might get you a better deal. 
  • 𝗪𝗵𝘆 𝘄𝗮𝗶𝘁? 𝗚𝗲𝘁 𝘁𝗵𝗲 𝗯𝗲𝘀𝘁 𝗼𝗳 𝗯𝗼𝘁𝗵 𝘄𝗼𝗿𝗹𝗱𝘀: House prices often skyrocket when rates plummet, all thanks to demand. Waiting for a rate drop? You might end up not saving anything. So, why not grab that house at a lower price now? And when the rates fall? Refinance! It’s like having your cake and eating it too. 

Understanding the current rates, market, and strategic considerations is just the first step. To make truly informed decisions, it’s equally important to delve into the underlying factors that shape DSCR loan interest rates. By grasping these elements, you can secure the best possible rates and maximize your investment returns. 

How can you calculate your DSCR loan interest rate?

A high-level approximation of the prevailing DSCR loan interest rate can be achieved by adding DSCR loan rates spread to the current 30-year fixed Freddie Mac rate. This approach is used for estimation purposes only, and it’s important to remember that your actual rate will be determined by your DSCR lender based on their specific loan program and your individual situation. 

DSCR loan interest rate = Freddie Mac 30-year fixed mortgage rate + Incremental DSCR loan rate spread 

As of [Jan 2, 2024]: 

  • Freddie Mac 30-year fixed mortgage rate = 6.61%  
  • Incremental DSCR loan rate spread = 0.9% – 1.5% 

For good competitive terms, the DSCR loan interest rate is approximately 7.5%. Keep in mind that the DSCR loan rate spread increases based on various other factors that we will cover in the next section. 

Factors that shape DSCR loan interest rates 

Navigating the factors that affect DSCR loan interest rates is key to securing better terms. By understanding and optimizing these elements, you can position yourself more favorably in the eyes of lenders. Let’s delve into each one: 

1. DSCR Ratio 

The Debt Service Coverage Ratio (DSCR) is a critical metric utilized by lenders to assess the cash flow adequacy of an income-producing property. To calculate DSCR in context of real estate financing, you divide the property’s annual gross rental income by its total annual debt servicing costs, which encompass Principal, Interest, Taxes, Insurance, and any applicable Homeowners’ Association (HOA) fees (PITIA). 

For instance, if a property’s gross income is $120,000 a year and the total debt service is $100,000, the DSCR would be 1.2. This figure signifies that the property generates 20% more income than is necessary to cover its debt obligations. 

A DSCR of exactly 1 means the income covers the debt obligations, without any surplus. Lenders generally look for a DSCR above 1, as it indicates that the property generates ample income to comfortably cover all associated loan expenses, plus an additional margin that could absorb potential income fluctuations or unforeseen expenses. 

The DSCR not only influences the approval decision but also plays a part in determining the interest rates of loans. Properties boasting a higher DSCR are often deemed less risky by lenders and may qualify for more favorable interest rates. 

Conversely, a lower DSCR could result in higher interest rates to compensate for the increased risk. It is, therefore, in the best interest of property investors to aim for a higher DSCR to secure the most advantageous loan terms possible. 

Here’s how different DSCR ratios could influence your DSCR loan interest rates, with the understanding that a higher DSCR is usually more favorable: 

DSCR loan interest rate adjustment based on DSCR ratio

2. Credit score 

Though DSCR loans primarily focus on the income potential of the property itself, your personal credit score remains a pivotal factor in the lending equation. It is a reflection of your financial reliability and a key indicator for lenders evaluating your creditworthiness. 

Even with the loan secured against the property’s cash flow, a solid credit score can be a deciding factor in the trust lenders place in your financial discipline. 

For example, a high credit score in the range of 750 or above may qualify you for the most competitive interest rates, while a lower score could mean higher rates to offset the perceived risk. 

Understanding that your credit history could influence your borrowing costs, it’s advantageous to maintain a strong credit profile when seeking DSCR loans. 

Here is a breakdown of how different credit score ranges and LTV can typically sway the interest rates for DSCR loans. The table below highlights the rate adjustments based on credit score and LTV. For instance, if your credit score is 700 and the LTV is 70%, the lender will increase the base rate by 0.5%.  

Note, this table is just an estimate, and the actual adjustment may vary based on your lender’s terms. 

DSCR loan interest rate adjustment based on credit score and LTV

While the typical minimum credit score for DSCR loans is around 620, there are lenders who may be willing to work with borrowers with scores below this threshold. However, these accommodations often come with certain contingencies—higher interest rates and larger down payments, for instance—to mitigate the heightened risk associated with lower credit scores. These measures ensure that lenders remain protected while offering borrowers the potential to finance their investment properties, albeit at higher costs. 

To improve your chances of getting better rates, focus on boosting your credit score. Additionally, involving a co-signer with a robust credit history can be beneficial. 

3. LTV (Loan-to-Value) 

The Loan-to-Value (LTV) ratio stands as a critical determinant of loan terms in the realm of real estate financing, providing a clear picture of how much of a property is financed through borrowing. 

An LTV ratio of 80%, for instance, means that the loan accounts for 80% of the property’s value, while the remaining 20% has been covered by the down payment. 

This ratio is a gauge for the lender to assess the level of risk involved with the loan—comparing the amount loaned against the property’s appraised value. A lower LTV ratio is typically seen in a favorable light since it indicates a substantial equity stake by the borrower, diminishing the lender’s risk exposure. 

On the flip side, a higher LTV ratio suggests a smaller equity portion and a heightened risk for the lender. This increased risk is often balanced by lenders through higher interest rates to protect their interests. 

To further understand how LTV ratios influence DSCR loan interest rates, refer to the graphic above that outlines the typical adjustments in interest rates associated with varying LTV ratios and credit scores. 

4. Investor Experience 

Your track record as an investor is not just a badge of honor—it can also be a tool for better financing terms. Lenders often consider your experience level when assessing risk and determining interest rates. If you’re a seasoned investor with a solid history of successful investments, you may find lenders more amenable to offering lower interest rates, as your experience suggests a lower risk profile. This history might include several successfully managed properties, a record of timely payments, or a portfolio showing diverse and stable investments. 

On the other side, as a newcomer to the investment scene, you may initially encounter higher rates. However, it’s important to remember that every seasoned investor was once a beginner. By shopping around and demonstrating due diligence, even less experienced investors can secure terms that align with their investment goals. Some lenders specialize in working with new investors and may offer flexible terms as a way of cultivating a long-term client relationship. It’s always worth having open conversations with potential lenders about what you can bring to the table and how you plan to grow as an investor. 

HomeAbroad provides DSCR loans for all levels of experienced investors with competitive rates and loan terms.

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5. Short-term Rentals/Airbnb 

Unlike long-term rentals, which generally provide consistent monthly income, short-term rentals are subject to fluctuating occupancy rates, seasonal demand, and even local regulatory environments that can change rapidly. This inconsistency translates to a less predictable income stream for lenders to rely on, which in turn is perceived as higher risk. 

Due to these variables, lenders typically hedge against this risk by offering higher interest rates for properties used as short-term rentals compared to those with long-term lease agreements. 

For instance, the interest rate for a property primarily used for short-term rentals might be 0.5% to 1% higher than a similar property rented out on a long-term basis

Investors should weigh the potential for higher revenue against the increased cost of borrowing to determine if short-term rentals align with their investment strategy. 

6. Mortgage Type 

When it comes to selecting a mortgage type for your DSCR loan, the choice can directly influence the interest rate you are offered. Standard options like a fixed-rate mortgage, where the interest rate remains constant throughout the loan term, or an Adjustable Rate Mortgage (ARM), where the rate may change based on market conditions, will affect your DSCR loan interest rate.  

However, opting for an interest-only mortgage, where you are initially only required to pay the interest on the loan and not the principal, can lead to an adjustment in your interest rate. Lenders may increase the rate by about 0.2% to 0.5% for these types of loans. 

This adjustment compensates for the additional risk that lenders bear during the interest-only period, as borrowers are not building equity in the property through principal repayments. 

7. Prepayment Penalty 

DSCR loans typically include a prepayment penalty, which is an important consideration for borrowers planning their finance strategy. There’s usually a prepayment window of 3-5 years, depending on the lender’s terms. During this window, if you pay off your mortgage in full, you’ll incur a prepayment penalty. This penalty is a way for lenders to recoup some of the interest income they lose when a loan is paid off early. 

However, borrowers have options to negotiate these terms. Reducing the prepayment window or lowering the penalty itself results in the lender increasing the interest rate by about 0.2% to 0.7%. The rate increase could be even more if you choose to ‘buy down’ the prepayment penalty, which means paying an upfront fee to reduce or eliminate the penalty. 

8. Refinance 

When refinancing a DSCR loan, including scenarios involving cash-out refinancing, it’s typical for lenders to adjust the interest rate upwards compared to the rates for initial property financing. Generally, this adjustment is around 0.2%, but it can be higher based on specific factors such as the Loan-to-Value (LTV) ratio and the Debt Service Coverage Ratio (DSCR) of the property. 

This increase in rates is largely due to the higher risk associated with refinancing, particularly with cash-out options. In such cases, lenders are essentially extending additional credit based on the equity of the property, which can increase their risk exposure. 


These are some of the key factors that typically influence DSCR loan interest rates. However, it’s important to remember that this is a general estimation, and the exact rates and adjustments can vary depending on your lender and specific circumstances. 

HomeAbroad offers DSCR loans from various lenders, and we can help you get the best DSCR loan interest and overall loan terms to maximize your investment property returns.

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Hear from Michael, a first time real estate investor who purchased an investment property in Austin, TX on how we helped him:  

I was nearly at my wit’s end trying to find a lender for my new rental property in Austin. It seemed like every door I knocked on had no clue about DSCR loans, or simply weren’t offering them. That’s when I stumbled upon HomeAbroad. Not only did they understand my struggle, but they also opened up a whole new world of lenders who were well-versed in DSCR. With their help, I sifted through several options and finally settled on one that offered me terms that felt tailor-made for my situation. Honestly, without HomeAbroad, I might still be searching!  

Michael Thompson, Austin, Texas

Real Estate Investor

Tips on securing the best possible DSCR loan rates 

After understanding the factors that influence DSCR loan rates, optimizing these elements is your next strategic step. The right approach can significantly improve the terms of your loan. Here are some additional tips, building on the factors we’ve already explored, to help you secure the best possible rates: 

1. Choose properties with a strong DSCR: 

The first step in securing favorable loan terms is selecting the right property. Look for properties that already have a solid DSCR ratio, indicating that their income is more than sufficient to cover all debt-related expenses. Properties with a strong DSCR are typically viewed as lower risk by lenders, which can translate into lower interest rates. 

2. Discuss future plans with your lender: 

If you’re dealing with a low DSCR ratio, remember that DSCR loans aren’t a black-or-white situation. Communicate your circumstances to the lender, along with any plans for renovations or improvements that could enhance the property’s income potential. Demonstrating this commitment to improving the DSCR ratio over time can persuade lenders to consider lower rates, as it indicates a likelihood of reduced risk. 

3. Improve your credit score: 

A higher credit score can significantly impact the interest rate you receive. If your credit score is on the lower side, consider strategies to improve it, such as paying down existing debt and ensuring timely bill payments. Since improving a credit score might take time, bringing on a co-signer with a strong credit history can also help in securing a more favorable rate. 

4. Pay points 

Paying points, also known as ‘buying down the rate,’ involves paying an upfront fee to the lender at closing to secure a lower interest rate on your loan. One point typically costs 1% of your total loan amount. For instance, on a $200,000 loan, one point would cost $2,000. Paying this fee upfront can result in a lower interest rate, which can save you money over the life of the loan, especially if you plan to hold the property for a long period. 

5. Shop around: 

Don’t settle for the first offer you receive. Shop around and compare rates from different lenders. Each lender may have different criteria and risk assessments, which means you could find significantly better terms with another lender. 

6. Engage in negotiation: 

Unlike conventional mortgages with more rigid terms, DSCR loans are offered by private lenders and come with a degree of flexibility. This means there’s room for negotiation. Engage in discussions with your lender to explore the possibility of customizing the loan terms to better suit your financial situation and investment goals. Whether it’s negotiating the interest rate, the loan-to-value ratio, or other terms, a well-reasoned negotiation can lead to more favorable loan conditions. 

7. Build a strong relationship with lenders: 

Building a good relationship with lenders can go a long way. Demonstrating reliability, transparency, and a solid track record can position you as a low-risk borrower, potentially leading to better loan terms in the future. 


Ultimately, the terms and loan rates you secure depend on the lender with whom you are working. Using the strategies, we’ve discussed can be instrumental in securing more favorable interest rates. It’s essential to thoroughly explore various lenders to find the one that aligns best with your needs and investment strategy. 

While shopping around for lenders can be time-consuming, especially in the fast-paced world of real estate, HomeAbroad offers DSCR loans from multiple lenders and we can get you qualified for a DSCR loan with the most favorable terms for your specific investment scenario.

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Check these factors when your DSCR lender offers low interest rates 

When evaluating low-interest rate offers from DSCR lenders, it’s wise to look beyond the surface to uncover any hidden or inflated fees and penalties. While a lower interest rate can be appealing, other aspects of the loan agreement may increase the overall cost or affect its suitability for your investment strategy. Here’s what to carefully consider: 

  1. Look for Hidden Fees: Examine the loan terms for any hidden fees. This includes processing fees, application fees, and other charges that might not be immediately apparent. 
  1. Understand All Penalties: Familiarize yourself with the penalty structure of the loan. Even though prepayment penalties and late payment fees are standard, their amounts can vary significantly among lenders. Understanding these can give you a clear picture of potential additional costs. 
  1. Assess the Total Loan Cost: Calculate the total cost of the loan, including interest and all fees, to compare effectively between lenders. Sometimes, a loan with a slightly higher interest rate but lower overall fees can be more economical in the long run. 
  1. Evaluate the Lender’s Efficiency: The speed and efficiency of loan processing are crucial, especially in competitive real estate markets. A lender who offers favorable terms but takes too long to process loans might not be the best choice. 
  1. Check Quality of Customer Service: A lender’s support and responsiveness can greatly influence your borrowing experience, particularly for long-term loans like those typically associated with real estate investments. 

HomeAbroad helps you unlock competitive rates while prioritizing transparency and customer satisfaction. Our goal is to ensure that your borrowing experience is as straightforward and satisfactory as possible. 

Frequently Asked Questions

  1. How do interest rates affect DSCR? 

    Higher interest rates increase your monthly payments, thereby reducing the cash flow from your property and lowering the DSCR ratio. Conversely, lower interest rates result in smaller monthly payments, enhancing your property’s cash flow and subsequently increasing the DSCR ratio. 

  2. Can I secure a low interest rate with a poor credit score? 

    Although DSCR loans prioritize property cash flow, your credit score still plays a role in determining your interest rate. A good credit score can lead to lower rates, reflecting responsible borrowing behavior. If your credit score is lower, consider a co-signer with strong credit to improve your rate prospects. 

  3. How to lock DSCR loan interest rate?  

    To lock in a DSCR loan interest rate, first consult with your lender to understand current market trends. Choose an opportune time when rates are low, then formally request a rate lock from your lender. This usually involves a specific agreement outlining the locked rate, duration, and any applicable fees. Be mindful of the lock period’s expiration and ensure your loan processing is completed within this timeframe to benefit from the locked rate. 

  4. Can I buy down the rate on a DSCR loan? 

    Yes, you can buy down the rate on a DSCR loan. This typically involves paying points upfront at closing to reduce the loan’s interest rate. Each point, usually equal to 1% of the loan amount, can decrease your interest rate by a predetermined amount. 

  5. Are interest rates higher on DSCR loans?

    DSCR loan interest rates are higher compared to conventional mortgage rates due to the increased risk of the lender.

Amresh Singh, CEO - HomeAbroad
About the author:
Amresh Singh is the founder & CEO of HomeAbroad and has an extensive 12+ years of experience in the financial services and mortgage industry - building business development and product strategy and leading customer strategy in the financial services industry domain.
Prior to co-founding HomeAbroad, Amresh has worked for one of read more...
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