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DSCR Ratio
Rent ÷ PITIA (mortgage, taxes, insurance). A DSCR of 1.25 means the property earns 25% more than it costs. Below 1.0 means negative cash flow — most lenders stop at 1.0 minimum; a few allow 0.75 with compensating factors.
Lower DSCR → higher rate or declined
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Prepayment Penalty
DSCR loans almost always carry a prepay. The most common structures are 5/4/3/2/1 (step-down over 5 years) or 3/2/1. Accepting a longer prepay term — or a harder penalty structure — typically buys you 0.25%–0.50% off your rate.
Longer prepay → lower rate
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Interest-Only (I/O)
I/O periods reduce your monthly payment by skipping principal paydown for the first 5 or 10 years. This improves DSCR on paper and helps more deals qualify. Most lenders add 0.125%–0.25% to the rate for I/O election.
I/O election → slight rate increase
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Cash-Out vs. Purchase
Purchasing a property generally gets the best pricing. Rate-and-term refinances come next. Cash-out refinances carry the highest risk premium — typically 0.25%–0.625% above a purchase rate, with LTV limits of 70–75% on most DSCR programs.
Cash-out refi → add 0.25%–0.625%
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Reserves
Lenders want to see 3–12 months of PITIA in liquid reserves after closing. More reserves = less risk = better rate in some programs. Thin reserves can trigger overlays that increase your rate by 0.25% or reduce max LTV.
Strong reserves → better terms
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Property Type Premium
SFRs price best. 2–4 unit properties add roughly 0.25%–0.375% for the added management complexity. Short-term rental (Airbnb/VRBO) properties carry the largest premium — typically 0.375%–0.625% — because income is harder to underwrite and more volatile.
STR → add 0.375%–0.625% vs. SFR
Note on STR income: For short-term rentals, lenders typically use Airbnb/VRBO trailing-12-month revenue (not projected), discounted by 25–30% to account for vacancy and management costs. Some lenders require a minimum 12-month operating history before qualifying STR income.