DSCR loans qualify investment properties primarily on rental income rather than tax returns, W-2s, pay stubs, or personal debt-to-income (DTI) ratios. That qualification method affects how the loan is evaluated, but it does not eliminate the usual costs of buying or refinancing a property.

DSCR loan closing costs can include lender fees, appraisal charges, title and settlement fees, recording charges, prepaid interest, taxes, insurance, and other transaction expenses. They are separate from the down payment and any cash reserves the lender requires.

That distinction matters because closing costs are only one part of the cash a DSCR borrower may need to complete a transaction. Here’s what typically goes into DSCR closing costs and what to budget for beyond them.

What Are DSCR Loan Closing Costs?

DSCR loan closing costs are the expenses and prepaid items associated with completing a rental-property purchase or refinance.

Some charges come from the lender, while others come from third parties involved in the transaction. The exact costs vary based on the lender, loan amount, property, location, and whether you’re buying or refinancing.

Common DSCR closing costs may include:

  • Lender origination or underwriting fees
  • Discount points, if applicable
  • Appraisal and property valuation fees
  • Title search and lender’s title insurance
  • Settlement or escrow fees
  • Recording fees and transfer taxes, where applicable
  • Attorney fees in states that require attorney involvement
  • Prepaid interest
  • Prepaid property taxes and insurance
  • Initial escrow deposits
  • Entity or LLC documentation costs, when applicable

These expenses are separate from your down payment, which represents the portion of the property’s purchase price you’re paying upfront, and reserves, which are funds that may need to remain available after closing.

The Consumer Financial Protection Bureau similarly distinguishes closing costs from the down payment when describing the expenses associated with obtaining a mortgage and completing a real estate transaction.

Common DSCR Loan Closing Costs

DSCR closing costs may include lender fees, appraisal, title, taxes, and prepaid expenses. What you actually pay depends on the lender, property, location, and loan. 

Lender and Valuation Charges

Lender and valuation charges may include:

  • Origination or underwriting fees
  • Processing or administrative fees
  • Discount points, if applicable
  • Appraisal fees
  • Additional property or rental-income analysis, when required

The appraisal helps the lender verify the property’s value. Depending on the property and loan program, the lender may also require additional documentation or analysis to support the property’s expected rental income.

Title, Settlement, and Prepaid Items

These may include:

  • Title search
  • Lender’s title insurance
  • Settlement or escrow fees
  • Recording charges
  • Transfer taxes, where applicable
  • Attorney fees in certain states
  • LLC or entity documentation costs, when applicable

These costs can vary significantly by location. For example, some states or municipalities impose transfer taxes while others do not, and the amount charged can depend on the property’s purchase price and local rules.

Prepaid and Escrow Costs

Some money collected at closing isn’t really a fee for obtaining the loan. Instead, it’s money paid in advance or placed into an escrow account.

These costs may include:

  • Prepaid interest
  • Prepaid homeowners insurance
  • Property tax deposits
  • Initial escrow deposits

The amount can depend on the closing date, tax schedule, insurance premium, and lender’s escrow requirements.

DSCR Closing Costs vs. Down Payment vs. Reserves

A down payment, closing costs, and reserves are separate cash requirements that serve different purposes. Investors should calculate all three before determining how much cash they need for the transaction:

  1. Down payment: The portion of the property’s purchase price you pay upfront.
  2. Closing costs: The expenses associated with obtaining the loan and completing the transaction.
  3. Reserves: Funds that remain available after closing as a financial cushion, when required by the loan program.

For example, if a property costs $375,000 and you put 20% down, your down payment is $75,000. That does not mean you only need $75,000 available.

You may also need enough cash to cover closing costs and satisfy any reserve requirement.

Reserves are typically measured in months of PITIA. If your monthly PITIA is $2,500 and the lender requires six months, that’s $15,000 in qualifying liquid assets after closing.

That money is generally not paid as a closing fee. Instead, it must remain available to satisfy the lender’s reserve requirement.

How Much Are DSCR Loan Closing Costs?

There is no single fixed amount for DSCR closing costs because the total depends on the loan, property, location, and lender.

As a general planning range, closing costs may amount to roughly 2% to 5% of the loan amount, although actual costs can fall outside that range.

At Griffin Funding, the lender-fee portion is flat rather than percentage-based: $795 processing plus $1,195 underwriting, $1,990 total regardless of loan size. On larger loans, that structure can save thousands compared to a lender charging one to two points in origination.

Some costs, such as origination fees and discount points, may be tied directly to the loan amount. Others, such as appraisal and recording fees, are relatively fixed. Property taxes, insurance, title costs, and transfer taxes can vary based on the property and location.

Because of that variation, a percentage estimate should be treated as a budgeting guideline rather than a quote.

DSCR Loan Closing Cost Example

Consider a $375,000 rental property with 20% down.

  • Purchase price: $375,000
  • Down payment: $75,000
  • Loan amount: $300,000
  • Interest rate: 6.99%
  • Loan term: 30 years
  • One discount point: Not included in this example

At 6.99% on a $300,000 loan, principal and interest would be about $1,994 per month.

The closing costs might include charges such as:

Closing cost Illustrative amount What it covers
Origination fee $1,990 flat  Griffin Funding’s $795 processing and $1,195 underwriting fees. Many lenders instead charge 1%–2% of the loan amount
Appraisal Varies Property valuation and, when required, rental-income analysis
Title and settlement Varies Title work, lender’s title insurance, and closing services
Recording and transfer charges Varies Government recording fees and applicable transfer taxes
Prepaid Interest Varies Interest from the closing date through the end of the month
Tax and insurance Varies Insurance paid in advance
Tax and insurance escrow Varies Initial deposits required by the lender
Entity/LLC costs Varies Documentation or other costs when the property is purchased in an entity

The table illustrates why it’s difficult to give one universal DSCR closing-cost figure. Some costs can be estimated early, while others depend on the property, location, insurance premium, closing date, and final settlement figures.

Discount points, if you buy the rate down, are separate from lender fees and priced as a percentage of the loan amount.

A lender’s Loan Estimate and later Closing Disclosure will provide the actual amounts for the transaction.

Why Prepaid Interest Can Change

Prepaid interest is one closing cost that can change simply because of the date you close.

It generally covers the interest that accrues between your closing date and the end of that month. Closing earlier in the month means more days of prepaid interest; closing later means fewer.

For example, on a $300,000 loan at 6.99%, daily interest is approximately:

  • $300,000 × 6.99% ÷ 365 = $57.45 per day

Closing near the beginning of the month could therefore require substantially more prepaid interest than closing near the end.

That does not necessarily mean closing later makes the loan cheaper. You’re simply paying the interest for different days at closing rather than through a later mortgage payment.

How Much Cash Do You Need to Close a DSCR Loan?

The amount you need available is more than the down payment alone. Using the $375,000 purchase example:

Down payment $75,000
Closing costs (2-5% of loan) $6,000–$15,000
Estimated Cash to Close $81,000–$90,000
Required reserves Additional, held after closing

The exact cash-to-close figure will depend on the final settlement statement and the specific loan.

Reserves are separate. If the lender requires six months of PITIA, for example, you would need six months of the property’s qualifying monthly payment available after closing.

Before sending funds, use the lender’s most recent cash-to-close figures rather than relying on a percentage estimate.

What Can Change Your Closing Costs Before Closing?

DSCR closing costs can change as the transaction moves toward closing. Factors that may affect the final amount include:

  • Final property taxes and insurance
  • HOA dues and escrow requirements
  • Appraisal or additional valuation requirements
  • Title and settlement charges
  • Recording fees and transfer taxes
  • Loan points or lender credits
  • Changes to the loan amount or interest rate
  • Purchase versus refinance structure
  • LLC or entity documentation
  • The closing date

Some of these changes affect the amount you need at closing without changing the underlying cost of the loan. For example, a later closing date may reduce prepaid interest while changing the amount of another prepaid or prorated item.

Taxes, insurance, and HOA dues can also affect your monthly PITIA, which may affect the property’s qualifying DSCR.

Review updated closing figures whenever the property or loan terms change, and ask the lender or settlement agent about any material difference from the earlier estimate.

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Frequently Asked Questions

Does closing near the end of the month make a DSCR loan cheaper?

Not necessarily. Closing near the end of the month can reduce the amount of prepaid interest collected at closing because fewer days remain in the month. But that is primarily a timing difference, not necessarily a reduction in the total interest you will pay over the life of the loan.

Your final cash requirement can also be affected by tax prorations, insurance, escrow deposits, and other transaction costs.

Compare the full settlement figures rather than looking only at the prepaid-interest line.

Why can one DSCR purchase show two title insurance premiums?

Two title insurance premiums may appear because the policies protect different parties.

The lender's title insurance protects the lender's interest in the property against covered title defects. An owner's title insurance policy, when purchased, protects the buyer's interest.

The lender will generally require its own title policy. An owner's policy may be optional depending on the transaction and local practices.

If you're unsure why both appear on your settlement statement, ask the title or settlement company what each policy covers and whether any simultaneous-issue discount applies.

Can DSCR refinance closing costs be paid from the loan proceeds?

Some DSCR refinance closing costs may be financed or paid from loan proceeds, depending on the loan program, available equity, maximum LTV, and underwriting requirements.

For example, a refinance may use part of the loan proceeds to pay eligible closing costs, while a cash-out refinance may provide additional funds after the existing mortgage balance and eligible transaction costs are paid.

However, financing closing costs increases the amount you owe. A larger loan can also increase your monthly principal-and-interest payment. If the property's rent stays the same, that higher payment can reduce the qualifying DSCR.

Consumer Financial Protection Bureau guidance notes that so-called "no-closing-cost" loans generally involve either lender credits or adding costs to the loan balance rather than eliminating the costs themselves.

Your lender can tell you which closing costs can be financed under the specific DSCR program and how doing so would affect your loan amount and qualification.

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 25 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list six times in its 12 years in business. Follow his updates on LinkedIn.