Comparing DSCR Lenders: The Questions That Actually Matter

Question one: how do you treat STR income specifically?

Not every DSCR lender underwrites short-term-rental income the same way. Some require a specific STR-income-appraisal form or comparable-rental-data source; others default to a long-term-rental estimate unless you push for the STR-specific product, which can materially understate revenue in a strong STR market. Ask directly: does this program have an STR-specific income methodology, and what source does it use — an appraiser's short-term rental schedule, a third-party market-data provider, or something else?

Also ask how the lender handles capped or legality-gated markets. A lender that mechanically applies a night-cap haircut to the projection before computing DSCR (see the cap-adjusted math in our night cap post) is being more honest with you upfront than one that ignores the cap and lets you find out about the gap at closing.

Question two: what's the actual DSCR floor, and what happens below it?

DSCR floors vary by lender and by program — some require 1.0 or higher, others offer sub-1.0 or 'no-ratio' programs at a rate or fee premium. If your deal is going to land near or under 1.0 after a conservative, cap-adjusted revenue number, the floor and the below-floor options matter more than the headline rate.

Question three: what does early exit actually cost?

Prepayment penalty structures vary widely across DSCR lenders — common structures include a declining percentage over several years (sometimes called a step-down), a flat percentage, or in some cases a yield-maintenance-style calculation. If your investment horizon on this property is uncertain, or you're planning to refinance quickly (see /buying-str-at-auction-foreclosure-dscr/ for exactly that scenario), the prepayment structure can matter more than a rate difference of a fraction of a point.

• Ask for the exact prepayment schedule in writing, not a verbal summary — get the percentage and the years it applies.
• Ask whether the penalty applies to a sale, a refinance, or both — some structures only penalize refinance, not sale.
• Ask if a shorter or no-prepayment-penalty option exists and what it costs in rate.
• Model the penalty against your realistic hold period, not your optimistic one.

Question four: reserves, seasoning, and portfolio limits

Reserve requirements (months of PITIA held in liquid accounts), seasoning rules for cash-out or purchase-then-refinance strategies, and caps on the total number of financed properties a lender will carry for one borrower all vary and all matter more as your portfolio grows. Ask each lender directly what its reserve requirement is, whether it changes with portfolio size, and what its maximum financed-properties limit is — this is the question that surfaces a wall you don't want to hit at property number six.