The Quick Read: Sort every line on the fee sheet into four groups: lender charges, third-party charges, government fees, and prepaids and escrows. Then keep all of it separate from your down payment and your reserves, which are different cash needs. Fee sheets on business-purpose rental loans are not standardized, so compare quotes on total dollars rather than on any single line.
- Four groups: lender fees, third-party fees, government fees, and prepaids/escrows.
- Three cash needs: closing costs, down payment, and reserves are separate buckets.
- Biggest lender line: origination and points, which are the most negotiable items.
- Hidden cost: a prepayment penalty is not paid at closing, but it sets your exit price.
- Small loans: flat-dollar fees take a larger percentage of a smaller balance.
A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. That is why the fee sheet looks different from a bank’s owner-occupied statement. This guide walks through it line by line, from the brokerage’s view across many lenders in its wholesale network. For the full program picture, see the complete DSCR loans guide.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
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.
What Counts as a Closing Cost, and What Doesn’t
Closing costs are the one-time charges to originate the loan and transfer the property. They do not include your down payment or your reserves. Reserves are verified liquid funds you hold after closing. On most files across the network they run about 6 months of PITIA, and above $1,500,000 they typically step up to about 9 months. Conservative rate-term files at modest leverage can see them waived. Reserves vary by lender, leverage, loan size, and transaction type.
Here is how the three cash needs differ:
| Cash need | Who gets the money | Paid at closing? |
|---|---|---|
| Down payment | Seller (as purchase price) | Yes |
| Closing costs | Lender, title, county, others | Yes |
| Reserves | You keep them | No, verified only |
On a purchase, most files land at 75%–80% LTV, meaning 20%–25% down. Select high-leverage programs reach 85% LTV with roughly a 700+ score. Closing costs come on top of that down payment. Plan for all three before you write an offer.
Which Document Will You Actually Receive?
Many investors expect the same paperwork a home buyer gets. That may not happen. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
The practical effect shows up in the paperwork. Federal rules exempt credit extended for a business purpose from the federal truth-in-lending rulebook. Credit to anyone other than a natural person, such as an LLC, is exempt as well. Consumer disclosure forms carry fee-tolerance limits and a three-business-day timing rule. Those protections do not automatically attach to a DSCR rental loan.
What does that mean for you? Some lenders and title companies still issue a settlement statement. Others use a simpler fee sheet. The format varies. Without a standard form, the comparison work falls on you. Ask for an itemized list and group it yourself.
One more caution: the exemption turns on the primary purpose of the loan. If a loan is really for personal use, different rules apply. That is a question for a qualified professional, not a fee sheet.
The Four Groups: A Line-by-Line Read
Start by sorting every line into one of four groups. This is the most reliable way to read any cost sheet.
Lender fees
These are origination, underwriting, processing, and the credit report. Origination is usually the largest lender-controlled line. Watch for separate underwriting or processing lines that duplicate what origination already covers. Bundled and unbundled quotes can look different but cost the same, so compare on total dollars.
Third-party fees
These include the appraisal, title search and insurance, survey, and settlement or attorney charges. They are partly shoppable. On a DSCR rental the appraisal includes a market-rent schedule. That is Form 1007 for a single-family home and Form 1025 for a 2–4 unit property. The multi-unit report typically costs more, since the appraiser analyzes operating income.
Title costs vary by state, and attorney-closing states add legal fees. Ask the settlement agent for the line-by-line.
Government fees
Recording fees and transfer taxes are set by statute. You cannot negotiate them. You can only confirm they match your county and state.
Prepaids and escrows
These are not true fees. They fund your own interest, insurance, and taxes. Prepaid interest runs from the closing date to month-end, so it equals the loan balance times the annual rate, divided by the days in the year, times the days remaining. Closing late in the month shrinks this line, because fewer days of interest remain to prepay. The first regular payment is then due sooner, since it follows the month of closing. Closing early in the month does the opposite: more prepaid interest up front, and a longer gap before the first payment. That tradeoff applies the same way on a purchase and on a refinance. The closing date moves cash between the closing table and your first payment, so compare quotes that assume the same date.
Initial escrow deposits fund the tax and insurance account. Whether a lender requires impounds is a program-level question, so ask early.
Points, Credits, and the Prepayment Penalty
Three levers trade against each other: origination or points, the interest rate, and the prepayment penalty. Pulling one moves the others.
- Paying points lowers the rate but raises cash to close. Whether it pays off depends on how long you hold. A long-term hold may justify paying more upfront. A short flip rarely does.
- A prepayment penalty is not due at closing, but it sets your exit price. Common structures include a step-down schedule, a flat charge, or an abbreviated interest-based charge. Lenders in the network offer a range.
- A no-penalty loan usually carries a higher origination fee or rate. Someone chose to pay for that flexibility.
Be skeptical of zero-closing-cost offers. The cost usually moves into the rate or into a penalty that can erase the savings. Ask which one you are paying.
The right choice depends on your plan. If you expect to refinance within a few years, a heavy penalty is a real risk. If you plan to hold for a decade, a longer penalty period costs you little. This is the flip point in most comparisons.
Why Small Loans Cost More, Proportionally
Many charges are flat dollars. Appraisal, title, settlement, and processing do not shrink with the balance. On a small loan, those flat items make up a bigger percentage. Investors buying lower-priced rentals often feel sticker shock for this reason.
Standard programs in the network run up to $3,000,000. Smaller balances route through select lenders in the network, and those lenders often price differently. Published ranges for total closing cost percentages vary widely from one source to the next. Treat any single percentage as a rough guide, not a rule. Your itemized sheet is the only number that matters.
Edge Cases That Change the Sheet
The general approach holds, but several situations change the lines.
- LLC closings. Closing in an entity can add title, insurance, and document work. Confirm each item in writing before closing. LLC-titled loans are available subject to lender program eligibility.
- 2–4 unit properties. The Form 1025 appraisal differs from the single-family report in both scope and fee.
- Refinance versus purchase. On a cash-out refinance, which tops out around 75% LTV across most of the network, costs can come out of proceeds. Seasoning of about 6 months is the common expectation. Lendmire’s piece How Closing Costs Work When You Pull Equity From Your First Rental covers that side in detail.
- Short-term rentals. Purchases go to 75% LTV, with refinances around 70% and cash-out at 70% on short-term-rental collateral. Expect a 640+ score and about 12 months of hosting history. 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.
- Ineligible property types. Manufactured homes, log homes, and barndominiums are not offered in these programs.
- Credit. A 620 floor exists in parts of the network. Most programs want around 660, and 700+ opens the strongest leverage tiers. Weaker credit usually changes pricing, which changes the points line.
An agency investment loan is a consumer-form loan with its own disclosures. A DSCR loan is not. Do not assume the two sheets line up.
A Worked Read: One Rental Purchase
Run the numbers on a modeled rental purchase at 75% LTV, using a stacked view rather than a single total. The structure matters more than any dollar figure. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
| Bucket | What it includes | Who receives it |
|---|---|---|
| Down payment | 25% of price | Seller |
| Lender fees | Origination, points, processing | Lender/broker |
| Third-party fees | Appraisal, title, settlement | Vendors |
| Government fees | Recording, transfer tax | County/state |
| Prepaids | Per-diem interest, first insurance, escrow deposit | Your own accounts |
| Reserves | About 6 months of PITIA, held | You keep them |
Add the first five rows for the cash you hand over at closing. Reserves sit on top as verified cash you must still have after closing. Investors who size the first five and forget the sixth are the ones who get surprised.
The strongest files clear two tests: enough equity and enough rental coverage. A larger down payment lowers the monthly payment and can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. Clearing 1.00 coverage is also not the same as positive cash flow. DSCR compares rent to PITIA only, while repairs, vacancy, management, and capex sit outside the number.
Comparing Two Quotes
Two sheets rarely line up line for line. Normalize them in this order:
1. Convert every lender charge, including points, into total dollars.
2. Add credits as negatives and note what they cost you elsewhere.
3. Strip out prepaids and escrows. They are your money, not a fee.
4. Compare the prepayment terms side by side.
5. Note the closing date each quote assumes, since it moves the prepaid line.
Then ask which quote leaves you with more cash and fewer surprises over your actual hold. That is a different question from which one costs less today.
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.
Quote Versus Final Statement
Compare the final sheet against your early quote line by line. Government fees and prepaids can shift with the closing date. Third-party fees can change by a modest amount. What you should question is a new lender line, a duplicate with a different name, or a vague administrative charge with no explanation. Business-purpose loans lack the standard consumer tolerance protections, so a polite written question is your main tool.
Red Flags to Ask About
- Two lender lines that appear to cover the same work.
- A fee with a vague label and no description.
- A charge on the final sheet that was absent from the quote.
- A no-closing-cost promise with no mention of rate or prepayment terms.
- An entity fee that nobody explained in writing.
Key Terms Defined
Origination fee: the lender’s charge for creating the loan, often quoted as a percentage of the balance.
Prepaids: interest, insurance, and tax amounts you pay in advance, which are not true loan fees.
Escrow deposit: the starting balance that funds your tax and insurance account.
Reserves: liquid funds verified after closing, not paid to anyone.
Prepayment penalty: a charge for paying off the loan early, set by the loan terms.
PITIA: principal, interest, taxes, insurance, and any association dues, the payment that rent is measured against.
Frequently Asked Questions
What percentage should I budget for closing costs?
There is no reliable single figure. Published ranges conflict because fixed-dollar fees weigh more on small loans and state costs differ. Use your itemized sheet and add the down payment and reserves separately.
Are reserves part of closing costs?
No. Reserves are verified liquid funds you hold after closing, commonly around 6 months of PITIA. You are not paying them to anyone, but you must show them.
Can I roll closing costs into the loan?
It depends on the transaction and the program. On a purchase, leverage caps apply to the price, so costs usually come out of pocket. On a cash-out refinance, costs can often come out of proceeds, within the roughly 75% LTV ceiling most of the network uses.
Which fees can I negotiate?
Lender charges such as origination and points are the most flexible. Third-party fees are partly shoppable. Government fees are set by statute and are not negotiable.
Do I get a Loan Estimate and Closing Disclosure?
Usually not as a matter of right. DSCR loans are business-purpose and exempt from those consumer forms. Some lenders still issue a similar layout, so ask what format you will receive.
What to Do Next
Ask for an itemized fee sheet early, sort it into the four groups, and compare total dollars and prepayment terms. 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. Programs change, every file is underwritten individually, and nothing here is a commitment to lend. For a related view, Lendmire’s piece How Closing Costs on a Rental Cash-Out Apply to the Full Loan shows the refinance side. Tax treatment varies; consult a qualified professional.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork, a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. eCFR, 12 CFR 1026.3 (Regulation Z exempt transactions)
2. Cornell Law School LII, 12 CFR 1026.3
3. OCC Comptroller’s Handbook, Truth in Lending Act
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: DSCR Loan Term Changes at Closing for a Rental With a Low Appraisal · Assumption vs New DSCR Loan for an LLC-Owned Rental · How to Raise a Thin DSCR on a Furnished Rental
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
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.