Maximize Your BRRRR Strategy in 2025 with DSCR Loans

As of May 2025, DSCR loan interest rates are averaging between 6.25% and 7.75% for fixed-rate options, depending on qualification factors like credit score, loan-to-value ratio, property type, and location. This represents a slight decrease from Q1 rates.

DSCR loans typically carry a premium of 0.75% to 1.5% above conventional mortgage rates. This difference exists because lenders consider investment properties inherently riskier than owner-occupied homes. However, the flexibility and qualification advantages often outweigh this cost difference for serious investors.

Most lenders require a minimum DSCR of 1.0 to 1.25, meaning your property should generate at least enough income to cover its debt obligations. Some lenders now offer programs for properties with DSCR as low as 0.75 for otherwise strong applications, though these come with higher interest rates.

Borrowers with credit scores above 740 receive the best DSCR loan rates. Each 20-point drop below 740 typically adds about 0.125% to your rate. Those with scores below 680 might face significantly higher rates or even difficulty qualifying with some lenders.

To secure the lowest DSCR loan rates: improve your credit score above 740, make a larger down payment (aim for 25-30%), shop multiple lenders and negotiate with competing offers, work with experienced DSCR loan brokers, time your application during favorable market conditions, consider buying down the rate with points for long-term holds, and explore prepaid interest options.

Yes, most DSCR loans include prepayment penalties, typically for the first 1-5 years of the loan term. These penalties can range from 1-5% of the outstanding loan balance. Always negotiate for the shortest prepayment penalty period possible, ideally 1-2 years maximum, especially if you might sell or refinance within a few years.

DSCR loans are available for most investment property types, including single-family residences, 2-4 unit properties, multi-family apartment buildings, mixed-use properties, and some commercial properties. Single-family residences typically receive the most favorable rates, followed by 2-4 unit properties.

DSCR loan rates are expected to remain relatively stable through the remainder of 2025, with potential for modest decreases of 0.25-0.5% if inflation continues to moderate. The current Federal Reserve stance suggests we've reached a plateau in the interest rate environment, creating a potentially favorable window for securing financing before the next rate cycle.