What should you check on a DSCR loan term sheet?

Beyond the rate, check the points and lender fees, the prepayment penalty structure, the maximum loan-to-value, the term and whether it is interest-only or amortizing, the rate-lock terms, and the reserve and escrow requirements. The prepayment penalty and the points are where a cheap-looking loan often turns expensive.

What is the most overlooked line on a DSCR term sheet?

The prepayment penalty. A low rate paired with a hard five-year prepayment penalty can cost far more than a slightly higher rate with a soft or short penalty, especially if you might sell or refinance. Always read the exact step-down and whether it is soft or hard.

Closing

How to Read a DSCR Loan Term Sheet

A term sheet is where a good rate can hide an expensive loan. The headline number is rarely the whole story. Here are the lines that actually decide the cost of a DSCR loan, and the traps to catch before you sign.

By Owen Brandt, Research Editor. Updated June 13, 2026.

A DSCR loan term sheet is a summary of the terms a lender is offering before you commit. It is also where two loans that look identical on rate can be thousands of dollars apart on real cost. Read it line by line. Where a line links to a deeper guide below, use it.

The lines that decide the cost

Interest rate. The headline, but not the whole story. Always read it next to the points.
Points and lender fees. One point is one percent of the loan paid upfront. A lower rate bought with points is only cheaper if you hold long enough to break even. See buying down the rate.
Prepayment penalty. The most overlooked line. Read the exact step-down and whether it is soft, waived on a sale, or hard, applying to both sale and refinance. See prepayment penalties.
Maximum loan-to-value. Sets your down payment. A point or two of LTV can decide whether a deal works. See down payment.
Term and amortization. Thirty-year fixed, an ARM, or interest-only changes the payment and the ratio. See interest-only and ARM loans.
Reserves and escrow. How many months of reserves and whether taxes and insurance are impounded. See reserves and escrow.
Rate lock. The lock length and cost, so a market move does not break the deal. See rate locks.

How to compare two term sheets

Do not compare on rate alone. Put the two side by side and total the real cost over your expected hold: the points and fees upfront, plus the rate over the years you will keep the loan, plus any prepayment penalty if you might exit early. The cheaper headline often loses once the penalty and points are counted. Use the comparison framework on the how to choose a DSCR lender page, and run the payment on the DSCR calculator.