DSCR loans
DSCR Loan Closing Costs: What to Budget
Closing costs on a DSCR loan are predictable once you know the parts. Here is what to budget, and the line that is not a closing cost at all.
See also the closing process and timeline.
The main components
- Origination points and lender fees. Often the largest piece. One point is one percent of the loan, and these trade against the rate.
- Appraisal. Investor-loan appraisals often include a market-rent estimate, so they can cost more than a standard one.
- Title and settlement. Title search, title insurance, and the closing agent's fee.
- Recording and transfer. Government fees to record the deed and mortgage, which vary by location.
- Prepaids and escrows. Upfront property tax and insurance the lender collects to set up the escrow account.
The line that is not a closing cost
Reserves are separate. Lenders want three to six months of PITIA sitting in the bank at closing, but that money is not spent, it is held. Investors who budget only for closing costs and the down payment get surprised by the reserve requirement. Count it as part of your true cash to close.
How to compare
Do not judge a loan on the rate alone. Two offers with the same rate can have very different points and fees. Line up the rate, the points and fees, the prepayment penalty, and the structure together, as described in the rates guide. The cheapest rate and the cheapest loan are often different loans.
Plan your full cash needs with the help of the requirements page, and check current pricing in the Rate and Terms Survey.