The Quick Read: There is no single figure, because the total depends on the lender, loan size, property, location, and how the loan is priced. As a share of the loan, it often runs higher than on a conventional investment loan, because lender charges tend to be larger and fixed third-party fees spread over a smaller balance. The charges are the same kinds you see on any mortgage. What changes is the size of the lender’s piece and how the file is priced. Investors usually see the total quoted as a percentage of the loan amount.
- Lender charges and points are the biggest swing factor, and they trade against the prepayment penalty and the pricing.
- Smaller loans cost proportionally more because title, appraisal, and processing charges are mostly fixed dollars.
- Closing costs, the down payment, and reserves are three separate buckets of cash.
- A refinance can sometimes roll costs into the balance, which raises the loan rather than removing the cost.
- Ask for an itemized fee sheet early and compare it line by line.
What Counts as a Closing Cost on a DSCR Loan?
Closing costs are the upfront charges to get the loan and transfer or pledge the property. They include lender fees, title and settlement charges, the appraisal, and recording. They do not include the down payment, prepaids and escrows, or reserves.
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As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Investors mix these buckets up all the time, so here is the split.
| Bucket | What it is | Paid to someone? |
|---|---|---|
| Closing costs | Fees to lender, title, appraiser, county | Yes |
| Prepaids and escrows | Interest, tax and insurance deposits | Held for your bills |
| Down payment | Your equity in the deal | Goes toward price |
| Reserves | Verified liquid funds after closing | No, only verified |
Cash to close is the down payment plus closing costs plus prepaids and escrows, minus any credits. Reserves sit on top of that. They are proof of liquidity, not a charge. Across Lendmire’s wholesale network, reserves commonly run around 6 months of PITIA, and loans above $1,500,000 typically step up to about 9 months. The exact number depends on the lender, leverage, and transaction type.
Why Do the Percentages Run Higher Than Conventional?
Two forces push the percentage up. Lender charges on investor loans tend to be larger. And a block of fixed-dollar costs sits on every file no matter how small the loan is.
Think of it as two piles. The first pile scales with the loan: origination, points, and some title charges. The second pile does not scale much: the appraisal, credit report, flood certification, settlement fee, recording, and entity documents. A larger loan spreads the second pile thinner. A smaller loan feels it heavily.
That is why a balance near the bottom of the range can look expensive as a percentage even when no single fee is out of line. Standard programs in the network run up to $3,000,000, and smaller balances route through select lenders. Investors buying lower-priced rentals should expect the fixed pile to take a noticeably bigger bite. If the margin on that deal is already thin, the closing bill can decide whether it makes sense.
The appraisal also works differently here. A DSCR file needs the property’s market rent supported, so the appraiser completes a rent schedule (form 1007 for single-family) or an operating income statement (form 1025 for two-to-four units) alongside the value opinion. That can add to the appraisal charge on some files.
Points, Prepayment Penalties, and Pricing: The Trade You Make at the Table
Pricing is where the largest controllable dollars live. Points, the interest-rate side of the quote, and the prepayment penalty all pull against each other. Move one and the others shift.
Here is the practical pattern across most programs the brokerage places files with:
- More points up front buys a better pricing position, which pays off only if you hold long enough.
- A shorter or lighter prepayment penalty usually costs something, either in pricing or in upfront charges.
- A zero-cost or low-cost structure generally means a lender credit is paying the fees in exchange for pricing that works harder against you over time.
So the right mix follows your exit plan. A buy-and-hold investor planning a long hold can often absorb more upfront cost for better pricing. A BRRRR investor planning to refinance in a short window should think hard before paying heavy points, because the cost gets recovered over a hold that never happens.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
The Fee Breakdown: Who Charges What
The largest disclosed categories on mortgage files are lender origination charges (including points) and title fees, according to the CFPB’s request for information on closing fees. That same document says title insurance premiums typically run 0.5 to 1 percent of the purchase price and that borrowers pay for the lender’s policy. An owner’s policy is a separate purchase. Those numbers come from consumer purchase lending, so treat them as a map of the categories, not a DSCR price list.
| Fee | Who gets it | Fixed or % of loan | Negotiable? |
|---|---|---|---|
| Origination / points | Lender or broker | % of loan | Often |
| Underwriting, processing | Lender | Fixed | Sometimes |
| Appraisal + rent schedule | Appraiser | Fixed | Rarely |
| Title search, lender’s policy | Title company | Mostly % | Sometimes |
| Settlement or closing fee | Title or attorney | Fixed | Sometimes |
| Recording, transfer taxes | County or state | Set by location | No |
| Entity documents | Title or lender | Fixed | Sometimes |
| Prepaids and escrows | Held for your bills | Varies | No |
A few of these deserve a closer look.
Origination and points. This is the line with the most room to move. Ask whether a charge is origination, a discount point, or a broker fee, because they are not the same thing.
Entity vesting. If you close in an LLC, expect extra entity documents and sometimes added title or vesting charges, subject to lender program eligibility. Confirm in writing whether the loan closes in the LLC or in your personal name, since that changes title and insurance.
Title and transfer charges. These vary widely by location. Some states use attorneys rather than title companies at the table. Transfer taxes can sometimes be split with or paid by the seller, but that depends on the contract and local custom.
Prepaids and escrows. Prepaid interest depends on the day the loan funds. Tax and insurance deposits are usually collected up front. Both are real cash due, but they are not lender profit.
Do Business-Purpose Loans Come With Standard Disclosures?
No. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are exempt from the standardized consumer disclosure forms, as the Federal Reserve’s Regulation X materials describe. A loan made primarily for business purposes falls outside RESPA under 12 CFR 1024.5(b).
The practical effect is simple. You do not automatically get a standardized estimate form with fee-tolerance protections. So request an itemized fee sheet early, and compare sheets line by line. “Business purpose” does not mean “no rules.” Other federal consumer laws still apply, and Hunton Andrews Kurth’s compliance analysis makes the same point.
Purchase, Rate-and-Term, and Cash-Out: What Changes
Purchase files carry the most line items. Title, transfer charges, and the seller contract all enter the picture. Typical purchase leverage across most programs sits at 75% to 80% LTV on an investment property, so the down payment bucket is large and closing costs come on top of it.
Refinances drop the purchase-transfer pieces. Rate-and-term refinances on investment property can reach an 85% LTV ceiling under select programs, and cash-out tops out at 75% LTV. Costs on a refinance can sometimes be rolled into the loan, but that is financing the fees, not erasing them. A zero-out-of-pocket offer usually means the fees sit in the balance or in the pricing. A cash-out refinance with financed points raises the balance, which lifts the payment and pulls the coverage ratio down. Cash-out files also commonly carry about 6 months of seasoning.
For a side view of how closing charges eat into proceeds on other loan types, see Lendmire’s piece How Much a VA Cash-Out Nets After the Funding Fee and Closing Costs. The math differs by program, but the lesson carries over: always look at net proceeds, not the headline loan amount.
A Walkthrough: From Fee Sheet to Cash to Close
Picture an investor buying a single-family rental on a purchase at 75% LTV with a 700-plus score. The file has no surprises. Here is the flow. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
1. Quote stage. The broker prices the file from LTV, coverage ratio, credit score, loan size, property type, and the prepayment penalty choice.
2. Fee sheet. The lender or broker issues an itemized sheet. Grouping by category (lender, third party, government, prepaids) makes comparison easy.
3. Third-party orders. Appraisal with rent schedule, title, credit report, and flood certification are ordered.
4. Entity work. If the borrower holds title in an LLC, the entity documents go to the title company and lender for review.
5. Final tally. Down payment, plus closing costs, plus prepaids and escrows, minus any credits, equals cash to close.
6. Reserves check. Separately, the lender confirms verified liquid reserves remain after closing.
Now run the same property through two fee scenarios. In the low case, origination is light, the borrower accepts a longer prepayment penalty, and title is cheap for the location. In the high case, the borrower pays points to improve pricing, takes a short penalty, and closes in a state with heavy transfer charges. Same house, same loan size, and a visibly different cash requirement. That spread is why the all-in figure matters more than any single line.
One more point on return math. Upfront costs raise the cash you invest, which lowers cash-on-cash return. A larger down payment can lift the DSCR by shrinking the payment. It never overrides leverage caps, credit floors, reserve rules, or property eligibility. And clearing 1.00 on coverage only compares rent to PITIA. Repairs, vacancy, management, utilities, and capex sit outside that calculation, so a passing ratio is not the same as positive cash flow. For a wider view, the complete DSCR loans guide covers how coverage, leverage, and credit fit together.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
How to Compare Two Fee Sheets
Comparing is where investors actually save money. Because no standardized form is guaranteed, the work falls on you.
- Put both sheets in the same category layout: lender, third party, government, prepaids.
- Separate points from origination. Two sheets can show the same total with very different structures.
- Check whether lender credits are baked in. A low fee total can hide a pricing tradeoff.
- Match the prepayment penalty on both. A sheet with no penalty and a sheet with a five-year penalty are not comparable.
- Match leverage and loan amount. A different LTV changes nearly everything.
- Ask which charges are fixed and which are negotiable. Title insurance and some third-party services may be shoppable.
- Look for duplicate charges under different names, such as processing and administration.
What Happens If the Deal Falls Apart
Not every cost waits for the closing table. Application-stage items such as the appraisal and credit report are usually paid up front, and they are often not refundable if the deal dies. A low appraisal, a coverage ratio that misses the program’s floor, or a property that fails review can all leave you with sunk costs. Where a file may sit near the edge, ask before ordering the appraisal which items are refundable and which are not.
Key Terms Defined
Origination fee: The charge for arranging and processing the loan, usually a percentage of the loan amount.
Prepaids: Cash due up front for items like interest and insurance that cover a period after closing.
Escrow deposit: An initial set-aside collected so the lender can pay taxes and insurance when due.
Reserves: Verified liquid funds you keep after closing, measured in months of PITIA.
Prepayment penalty: A charge for paying off the loan early, tied to a set number of years.
Lender credit: A credit that offsets fees, usually in exchange for pricing that works less in your favor.
Common Mistakes
Treating the headline figure as universal. Quotes for this loan type vary widely between lenders. Compare your own file, not a number on a web page.
Assuming the consumer estimate rules apply. They do not, so the burden of comparison is yours.
Ignoring the prepayment penalty. Dodging it usually costs more in pricing or points. Match the choice to your hold period.
Counting reserves as a cost. They are not paid to anyone, but you must still show them.
Chasing zero closing costs. Offers that promise to eliminate closing costs often shift them elsewhere, and the money does not disappear. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, so any added cost still has to fit within that calculation.
Forgetting fixed fees on small loans. A thin-margin deal on a small balance gets hit hardest.
Frequently Asked Questions
Are closing costs on a DSCR loan higher than on a conventional loan?
Usually, as a percentage of the loan. Lender charges tend to be larger, and fixed third-party fees weigh more when spread across a smaller balance. The gap depends on the lender, the points chosen, and the loan size, so compare itemized sheets on your own file.
Can I roll closing costs into the loan?
Sometimes, mostly on refinances. Rolling costs in raises the loan balance, which raises the payment and lowers the coverage ratio. Leverage caps still apply, so the added costs must fit within the program’s LTV limit. Purchases typically need the cash up front, subject to lender guidelines.
Do reserves count as closing costs?
No. Reserves are verified liquid funds you hold after closing, commonly around 6 months of PITIA, and more on larger loans. Prepaids and escrow deposits are different. Those are cash due at the table, though they fund your own future bills.
Who pays for the appraisal?
The borrower, usually up front. On this loan type the appraisal includes a rent schedule or operating income statement, so it can cost more than a standard value-only appraisal. Whether it is refundable if the deal falls through depends on the lender and the order terms.
What can I negotiate?
Origination and points often move, and underwriting or processing charges sometimes do. Recording and transfer charges are set by location. Seller concessions and lender credits may help, subject to the contract and lender guidelines.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a broker that arranges DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Program terms, eligibility, and pricing vary by borrower, property, and lender; this is not a commitment to lend. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. CFPB request for information on fees in residential mortgage transactions
2. Federal Reserve: Regulation X and RESPA exemptions
3. Hunton Andrews Kurth: Beware of “Business Purpose”
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Challenge a Low Appraisal on a DSCR Loan · How Much You Can Borrow for a DSCR Loan on Condo Properties? · How Much You Can Borrow for an Interest-Only DSCR Loan on Condo Properties?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.