One of the most common surprises for first-time DSCR borrowers is the total cost to close. DSCR loans carry some additional fees compared to conventional investment property loans — reflecting the non-QM lender infrastructure, risk pricing, and the flexibility they provide. Understanding exactly what closing costs to expect, which are negotiable, and how to minimize total cash at closing is essential for accurate deal analysis.
DSCR Loan Closing Cost Breakdown
DSCR closing costs fall into three categories: lender fees, third-party fees, and prepaid items.
Lender Fees
• Origination fee: 0.5–2% of loan amount (the primary lender/broker fee)
• Underwriting fee: $1,000–$1,500 (lender's cost to underwrite the file)
• Processing fee: $500–$1,000
• Rate buydown points (optional): 1 point = 1% of loan amount = approximately 0.25% rate reduction
Third-Party Fees
• Appraisal: $500–$900 (often collected upfront before closing)
• Title insurance: 0.3–0.5% of loan amount (varies by state — Florida uses promulgated rates)
• Title search and exam: $200–$400
• Settlement/closing fee: $300–$600
• Recording fees: $100–$300
• Survey (if required): $300–$600
• Environmental/flood certification: $10–$50
Prepaid Items
• Homeowners insurance: First year premium paid at closing
• Property taxes: Prorated from closing date to year end
• Per-diem interest: Interest from closing date to end of month
• Escrow setup: 2–3 months insurance + taxes for escrow impound account
How DSCR Closing Costs Compare to Conventional
DSCR closing costs are generally higher than conventional investment property loans, but the gap is smaller than many investors expect:
- Origination fees: DSCR lenders typically charge 1–2 points vs 0.5–1 point for conventional. On a $300,000 loan, this is $1,500–$3,000 more.
- Appraisal: Similar cost, but DSCR appraisals include a market rent analysis that conventional appraisals may not.
- Title and settlement: Identical regardless of loan type.
- No PMI: DSCR loans at 20%+ down do not require private mortgage insurance, which conventional loans at 15-20% down do require.
- No income documentation costs: No cost for tax transcripts, VOE (verification of employment), or income analysis — these are unique to conventional and not required for DSCR.
Strategies to Reduce DSCR Closing Costs
Several approaches can reduce total cash to close:
- Negotiate seller concessions — In markets with negotiating room, sellers can contribute up to 2% of purchase price toward closing costs on investment properties. This reduces cash out of pocket without affecting loan qualification.
- Roll costs into the rate (lender credits) — Accept a slightly higher rate in exchange for lender credits that offset closing costs. Useful when capital preservation is the priority.
- Choose no-point programs — Some DSCR lenders offer no-origination-fee programs at a slightly higher rate. Run the break-even analysis to determine whether paying points or taking the higher rate costs less over your expected hold period.
- Shop third-party services — In Florida, title insurance rates are promulgated (state-regulated) but settlement fees, survey costs, and other third-party items are negotiable. Using the seller's title company in Florida transactions can sometimes reduce settlement fees.
- Time closing to end of month — Closing at the end of the month minimizes per-diem interest (you only pay interest for the days remaining in the month).
Frequently Asked Questions
Typically 2–4% of the loan amount, including lender fees (origination, underwriting, processing), third-party costs (appraisal, title, settlement), and prepaid items (insurance, taxes, per-diem interest). On a $300,000 DSCR loan, expect $8,000–$15,000 in total closing costs depending on lender fees and local third-party costs.
Lender fees are typically higher — 1–2 points vs 0.5–1 point for conventional. However, DSCR loans have no PMI (for loans at 20%+ down) and no income verification costs, which partially offsets the higher origination. Total cost difference is typically $2,000–$5,000 on a standard investment property loan.
Closing costs cannot be added to the loan balance on purchase transactions — you must bring them to closing. On refinance transactions, costs can sometimes be rolled into the new loan amount if the resulting LTV stays within program limits.
Typically $500–$900 for residential DSCR properties. The DSCR appraisal includes a market rent analysis in addition to the standard valuation, which is why it may cost slightly more than a standard residential appraisal.
Yes — sellers can contribute up to 2% of the purchase price toward closing costs on investment property transactions. This is negotiable as part of the purchase offer and can significantly reduce cash needed at closing.
Some lenders offer no-origination-fee programs at a higher rate (lender credit offsetting fees). True no-closing-cost DSCR loans (covering third-party costs as well) are rare. More commonly, investors use rate/fee trade-offs to minimize upfront costs at the expense of a slightly higher rate.