1st Advantage MortgageCompare DSCR offers on the same loan amount, term and rate lock, then put every cost and condition in one table: lender fees, prepayment terms, reserves, rent rules, appraisal rules, escrows and timing. A lower rate that comes with heavy fees or a long prepayment term can cost more than a slightly higher rate without them.
There is no standard disclosure form for business-purpose investor loans, so two offers can describe the same loan in different words. Build your own comparison. The twelve questions below work in any state, and the last section notes where state closing practices change the answer.
The twelve questions
| # | Ask | Why it matters |
|---|---|---|
| 1 | What loan amount, term and rate does this quote assume? | Offers built on different assumptions cannot be compared. |
| 2 | For how many days is the rate locked, and what does an extension cost? | A short lock on a slow closing can reprice the loan. |
| 3 | What are all lender fees, including any points? | Fees can be quoted separately from the rate. |
| 4 | What is the prepayment term, and can it be shortened? | It limits a sale or refinance. See prepayment penalties explained. |
| 5 | What minimum DSCR applies to my file? | It sets your margin for a lower appraisal rent. |
| 6 | Which rent counts: lease, appraiser's schedule or the lower? | See building a rent number. |
| 7 | How many months of reserves, and what counts as reserves? | Cash you must keep after closing. |
| 8 | Are taxes and insurance escrowed? | It changes your cash flow and your closing costs. |
| 9 | Who orders the appraisal, and what if value or rent comes in low? | Decides whether you keep the deal. |
| 10 | Is there a personal guarantee, and does an entity borrower change terms? | Sets your exposure. |
| 11 | What is the expected closing timeline? | Fits your contract deadline. |
| 12 | What happens at the end of any interest-only period? | The payment can step up. |
Reading the answers critically
A few answers deserve a second look. A low rate with a long, steep prepayment term may suit a ten year hold and punish a three year flip, so match the term to your plan. Points paid up front only pay back if you hold long enough, so divide the cost of the points by the monthly savings to find the break-even month. A lender that will not put its fees in writing before you pay for an appraisal is telling you something. A lock that expires before your expected closing date can leave you repricing on a worse day, so ask what an extension costs and whether it is a fee or a rate change. Finally, check who pays for the appraisal and whether the fee is refundable if the deal dies for reasons outside your control.
Ask the same questions of every lender, in the same order, and record the date and the person who answered. If two offers differ on a point, ask the lender to explain the gap, because the answer is often a different assumption about rent, credit tier or loan to value rather than a better deal.
How to line offers up
- Ask each lender to quote the same loan amount, term and lock period.
- Copy the answers into one sheet, one column per lender.
- Run each monthly payment through the DSCR calculator with the same rent, tax and insurance, so the ratio is comparable.
- Rank the offers on total cost over the time you expect to hold, not on the headline rate.
A worked comparison
Suppose offer A has a slightly lower rate but a three year prepayment term and a higher lender fee, and offer B has a slightly higher rate, a shorter term and a lower fee. If you expect to refinance in two years, A can cost more in total because you pay the fee for a loan you leave early and may owe the prepayment charge. If you plan to hold ten years, A can come out ahead. Neither offer is better in the abstract. The comparison sheet turns that judgment into arithmetic: put each fee, each monthly payment and each prepayment amount against your hold period and compare the totals.
Where state practice changes the answer
Closing costs differ by state: some states close through an attorney and some through a title company, recording and transfer charges vary, and the way taxes and insurance are escrowed varies by lender. If you are buying where you do not live, see our out-of-state checklist. For the full list of documents lenders request, read the requirements guide.
Keeping the comparison fair
When you share your scenario with several lenders, give them identical facts: the same property address, the same rent evidence, the same credit range and the same closing date. If one lender hears a different story, the quotes are not comparable. Ask each to send the terms by email so you have a record, and ask what could change the quote, such as the appraisal, the credit report or the lock timing.
Frequently asked questions
How do I compare DSCR loan offers?
Use the same loan amount, term and lock period, then compare lender fees, prepayment terms, reserves, rent rules, escrows and timing in one table.
Is the lowest rate always the cheapest DSCR loan?
No. Fees, points and a long prepayment term can outweigh a small rate difference, so compare total cost over the time you plan to hold.
Is there a standard DSCR loan disclosure?
Not one that all lenders use for business-purpose loans, which is why you should write your own comparison sheet.