The Quick Read: There is no single price, because your total is the sum of lender charges, third-party fees such as the appraisal and title work, and prepaid items like insurance and tax deposits, and each of those moves with loan size, location, the lender, and the income evidence a short-term rental file needs. Cash to close adds your down payment on top. Reserves are a separate check on your bank balance.
- On a short-term-rental purchase, leverage typically tops out at 75% LTV on the strongest files, so plan on roughly 25% down.
- On a short-term-rental refinance or cash-out, leverage typically tops out at 70% LTV, subject to lender guidelines.
- Most programs expect a 640 credit score or better and about 12 months of hosting history.
- Select programs start at 1.00 coverage on a short-term-rental purchase, and also at 1.00 on a refinance.
- The costs unique to a short-term rental come mostly from the appraisal and the income evidence, not from a different property value.
Every investor asks the same thing first: what number do I bring to the table? This guide breaks the answer into pieces you can price yourself. It also shows where short-term rental files differ from a plain long-term rental. The wholesale lenders Lendmire places files with differ on details, so the ranges below describe typical programs, not promises.
Short-Term Rental Calculator
Run the STR numbers in your market
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 nightly rate, occupancy, taxes, and insurance for a more accurate picture.
Short-term rental income is documented with a 12-month history or a market data report. Program parameters update from Lendmire’s centralized guideline source.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Nightly rate, occupancy, taxes, and insurance are editable estimates. 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.
Key Terms Defined
You will see a handful of terms on every fee sheet. Here they are in plain words.
- DSCR (debt service coverage ratio): the property’s rental income divided by its monthly housing obligation. At 1.00, the income matches the obligation.
- PITIA: principal, interest, taxes, insurance, and any association dues. This is the monthly obligation the ratio is measured against.
- LTV (loan-to-value): the loan balance as a share of the property’s value. Lower LTV means a bigger down payment.
- Origination charges: the lender’s own upfront fees for making the loan. They can include points, processing, and underwriting.
- Third-party fees: charges paid to outside providers, such as the appraiser, the title company, and the recording office.
- Prepaids and escrows: money paid in advance or set aside for interest, insurance, and tax bills. They are not lender fees.
- Cash to close: the total you bring at settlement. It is the down payment plus closing costs plus prepaids, adjusted for credits.
- Reserves: liquid funds the lender verifies you hold after closing. You do not pay them at the table.
- Form 1007 and Form 1025: appraiser forms that document market rent. The 1007 covers a one-unit property, and the 1025 covers two to four units.
- Prepayment penalty: a fee charged if you pay off the loan early. It is priced against your upfront cost, so it belongs in this conversation.
What Counts as a Closing Cost, and What Doesn’t?
Closing costs are what you pay to get the loan and transfer the property. They do not include your down payment, and they do not include reserves. Mixing the three buckets is a common reason investors arrive short of cash.
Here is how the buckets stack on a short-term-rental purchase:
1. Down payment. This is the equity you put in. On a purchase at up to 75% LTV, it is typically at least 25% of the price.
2. Closing costs. These are lender charges plus third-party fees.
3. Prepaids and escrow deposits. These depend on the closing date and on your insurance and tax schedules.
4. Reserves. These are verified, not spent. They commonly run around six months of PITIA, though they vary by lender, leverage, loan size, and transaction type. Lendmire covers the details in its piece How Much in Reserves Does DSCR Require to Close a Short-Term Rental Purchase?.
Your cash to close covers the first three. Reserves sit beside them. A larger down payment lowers the monthly obligation and can lift your coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files have enough equity and enough rental coverage.
Why Does a Short-Term Rental Cost More to Document?
The property does not cost more to buy because it is a short-term rental. The paperwork costs more, because the lender needs proof of income that a normal lease would supply on its own.
Start with the appraisal. The appraiser values the real estate and documents monthly market rent. Business income is outside that job. As McKissock Learning explains, the appraiser values the real property only, and the lender makes the final call on income. Short-term rental use does not change the appraised value of the real estate.
The rent form is where nightly income gets awkward. Fannie Mae’s appraiser update says the Form 1007 was not designed for short-term rentals. It calls for monthly-lease comparables and says multiplying a nightly rate by 30 is incorrect. This is agency material, and it applies here only for the form names and that contrast. DSCR programs set their own rules.
HousingWire reports that appraisers are encouraged to decline assignments that stretch the form to cover nightly income. In practice, that leaves a gap, and the lender fills it with a second income source. Common choices include:
- a projection report from a data service,
- about 12 months of booking records or bank statements,
- a trailing-12 statement from a property manager.
Each can add a modest third-party charge. Depending on the program, the lender may also adjust gross short-term income for expenses before running the ratio. Lendmire’s piece Can a Short-Term Rental Still Close on DSCR if the Projection Drops? shows how that adjustment can change the file.
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.
The Fee-by-Fee Table
Here is the line-item map. Dollar amounts vary by lender, loan size, and location, so this table shows who gets paid and where you have room to push.
| Cost | Paid to | STR-specific? | Negotiable? |
|---|---|---|---|
| Origination and points | Lender | No | Often |
| Underwriting and processing | Lender | No | Sometimes |
| Appraisal with rent schedule | Appraiser | Partly | Rarely |
| Income report or booking records | Data vendor or you | Yes | Rarely |
| Title and settlement | Title company | No | Shop-able |
| Prepaids and escrow deposits | Insurer, county, lender | Insurance type | Timing only |
Origination is the biggest lender-controlled lever. Lenders itemize differently, so one lender’s origination line can hide inside another lender’s processing line. Compare lines, not totals.
Lender charges on investor loans commonly run higher than on a standard owner-occupied mortgage, mostly because of origination and points. The extra work of verifying rental income also shows up in the third-party column.
Why Do Small Loans Feel Expensive?
Smaller loans carry a heavier percentage because some costs are fixed in dollars. Appraisal, title, settlement, and recording charges barely change between a modest balance and a large one. Points and origination scale with the loan. So a fixed-cost bundle takes a bigger bite out of a small balance.
Think of it as two layers:
- Percentage layer: points and origination, which grow with the loan.
- Dollar layer: appraisal, title, settlement, recording, which do not.
A larger loan dilutes the dollar layer. A smaller loan concentrates it. Loans up to $3,000,000 fit standard programs, and smaller balances route through select lenders in the network, where fee structures can differ. Ask for the full fee picture before you assume a small property is cheap to finance.
Walking Through Cash to Close
Picture a purchase of a short-term rental at 75% LTV. Your cash to close has four moving parts: 25% of the price as down payment, lender charges, third-party fees, and prepaids. Reserves are verified on top. Rather than quote dollars, here is how the buckets behave across three transactions. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
| Transaction | Typical max LTV | Coverage floor | Cash at closing |
|---|---|---|---|
| STR purchase | Up to 75% | 1.00 | Down payment plus costs |
| STR refinance | Up to 70% | 1.00 | Costs only |
| STR cash-out | Up to 70% | 1.00 | Costs, offset by proceeds |
A purchase asks for the most cash up front. A refinance needs no down payment, but closing costs still apply, and some lenders ask for a seasoning period, typically around six months on a cash-out. A cash-out brings money back, yet it still carries every cost on the fee table.
Compare that with a standard long-term rental. A long-term purchase lands at 75%–80% LTV on most files, so the short-term-rental ceiling sits at the lower end of that range. On a cash-out, a standard rental tops out around 75%, while short-term-rental collateral tops out at 70%. Because a short-term rental asks for more equity, it also asks for more cash at the table.
Two other file items affect pricing and leverage: a 640 credit score or higher, and about 12 months of hosting history. A score of 700 or better usually opens stronger leverage tiers. Every file is underwritten individually, and all of this is subject to lender guidelines.
How Does an LLC Change Closing Costs?
Closing in an entity can add fees. These might include entity documents, a certificate of good standing, or extra title work. Loans to LLC-titled borrowers are available subject to lender program eligibility. Which fees apply varies by lender, so ask for the entity line item up front.
What Does the Prepayment Penalty Have to Do With It?
A prepayment penalty is not a closing cost. It is priced against one. A longer or steeper penalty usually means lower upfront charges or better pricing. A shorter penalty, or none, usually means the lender charges more at settlement or prices the loan higher. A common structure steps down each year over a multi-year window.
The penalty applies to the payoff balance, so on a larger loan an early exit can cost far more than the upfront savings that bought it. That makes your plan the deciding factor:
- Hold and forget: a longer penalty can lower your upfront cost.
- Refinance within a couple of years: a short or no-penalty structure is worth paying for.
- Unsure: price both options and compare the total over your likely hold period.
Where the General Rule Breaks
Two-to-four-unit short-term rentals. The appraisal is a Form 1025, which has a rent schedule built in. It usually costs more than a one-unit appraisal.
A low rent figure on the appraisal. Some lender channels use only the appraiser’s number. Others allow a variance or let you transfer the appraisal to another lender, which avoids paying for a second one. Ask any lender what happens if the rent figure comes in low and whether the appraisal can be reused.
Seller credits and local transfer charges. Credits reduce your net cash to close. Transfer and mortgage taxes vary by state and county, and who pays them is often negotiable in the contract. 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.
No-prepay structures. Dropping the penalty often shifts cost into an upfront fee or the pricing. The savings are real only if you exit early.
Hosting history gaps. A buyer with no hosting record may face a different documentation path, or a different program. That can change both the fee list and the leverage.
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 Do You Compare Quotes Line by Line?
Request each lender’s fee sheet and put the origination lines side by side first. This matches the advice in the CFPB’s Loan Estimate explainer, which describes origination charges as the lender’s upfront fees and says estimated cash to close includes your down payment plus closing costs, adjusted for credits.
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, and they are exempt from the consumer disclosure rules known as TRID. The consumer form is a useful model of cost categories, but a DSCR lender’s fee sheet follows its own format. That is why line-by-line comparison matters.
Use this checklist:
- Add every origination, processing, and underwriting line, including ones with unusual names.
- Watch for one fee split into several items. It is a common way to pad a total.
- Ask which third-party fees are estimates and which are fixed.
- Ask whether the appraisal can transfer if you switch lenders.
- Confirm the prepayment structure and what it costs to remove.
When Does Each Cost Hit?
Costs arrive in stages:
1. Application: you may pay for the appraisal and any income report.
2. Underwriting: the lender reviews your appraisal, income evidence, credit, and reserves.
3. Settlement: you pay lender charges, title and settlement fees, recording charges, and prepaids.
4. After closing: you hold reserves, and the first mortgage payment and operating costs begin.
Cash to close is mostly the third stage, but the first stage can cost you money before you commit.
Five Common Mistakes
- Treating closing costs as all fees. Part of your cash at the table is prepaids and escrow deposits.
- Multiplying a nightly rate by 30. That is the shortcut Fannie Mae’s appraiser guidance calls incorrect.
- Assuming the appraisal proves your income. The appraiser documents value and market rent. The lender decides income.
- Reading a 1.00 coverage ratio as profit. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside the calculation. A select-lender path below 1.00 exists, with leverage and terms adjusted, but the same caution applies.
- Budgeting once for many deals. Each purchase is underwritten separately, so each one needs its own down payment, closing costs, and reserves.
Frequently Asked Questions
How much are closing costs on a DSCR loan?
No fixed percentage applies, because the total depends on loan size, state, lender, and the documentation the property needs. Lender charges usually run the largest, followed by title and the appraisal. Add prepaids and escrows to get cash to close, and keep reserves separate.
Does a short-term rental cost more to close than a long-term rental?
Usually a little more, but the extra cost comes from the income evidence, not from a different valuation. Expect possible charges for a projection report or booking records. Equity requirements also differ, since the short-term-rental purchase ceiling is 75% LTV.
Are reserves part of closing costs?
No. Reserves are liquid funds the lender verifies you hold after closing. They commonly run around six months of PITIA, though conservative files at modest leverage may see them reduced, and larger loans often step up.
Can the seller pay part of my closing costs?
Seller credits can reduce your net cash to close. Program guidelines may limit how much a lender will accept, so settle that before you write the offer.
Is a no-prepayment-penalty option worth the extra cost?
It is worth it only if you expect to sell or refinance early. The cost usually appears as a higher upfront fee or higher pricing. If you plan to hold for years, a standard penalty structure often costs less overall.
Next Steps
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 arranging financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. For the full program picture, read the complete DSCR loans guide.
The investors who budget best treat closing costs as three separate checks: the fee sheet, the down payment, and the reserves. Every short-term rental has a different mix of the three.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. McKissock Learning on Form 1007 and short-term rental appraisals
2. Fannie Mae appraiser update
3. HousingWire on short-term rentals and the appraisal playbook
4. CFPB Loan Estimate explainer
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Rental With a Rent-to-Own Tenant Qualify for a DSCR Loan? · Does a Short-Term Rental Need a Dedicated Policy for a DSCR Loan? · How to Finance a Beach Condo Short-Term Rental in Retirement on DSCR
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.