DSCR Loan Fees - More than expected... is this normal?
Most Popular Reply
Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votesQuote from @Ian Bower:
Quote from @Jay Hurst:
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500
A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.
I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hey Jay - I too am asking why :D
My only experience has been with conventional mortgages - I recently purchased my own home with one and since I am a small business owner it was like pulling teeth.
The DSCR loans seem much easier to qualify for, but perhaps there are other loan types out there that are less expensive and also aren't a root canal? (the way the conventional mortgage was a root canal)
I am probably going to pay cash for the property upfront and then finance it after the close, so I have some time to explore financing products.
The pain of the root canal depends on the dentist. Same as the experience for the self employed borrower. I am assuming it was a root canal like experience because of the drib and drabs of documentation that that the LO asked for? LO's who are not experienced in general or maybe who just do not work with self employed very often can make the experience much worse then it needs to be. Generally, only 1 or 2 years of business and personal tax returns (depends on how long your business has been around) should be the only additional docs needed for most self employed vs W-2 wage earners.
and the items mentioned above are not relevant for a qualified borrowers (and some are down right incorrect). I have been doing DSCR loans for 10-12 years back when they were called cash flow loans, so when they fit they are a great product (even without the nonsense unlicensed DSCR only brokers say about them like the not on credit report BS) but they are NOT as good as a conventional if one qualifies.
Hurst Real Estate, INC4.989 Reviews
27 Replies
- 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Hey Ian,
Tough to say without an official Loan estimate. What is the loan size? If it's a $100k loan amount, then yes this seems pretty fair across the board. You could also pay no points on a DSCR, however the rate will be higher.
LuxePrivate Investments LLC 572 Reviews - 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Ian Bower:
Thanks - It's a $120k loan (ish)
Yea then you are getting fair fees for this loan. I would look more closely at the rate and PPP period if the fees remain the same from lender to lender. I would also ask for a rate sheet to see how the loan was priced. This will give you a true comparison as many lenders have different rate spreads.
LuxePrivate Investments LLC 572 Reviews - 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hurst Real Estate, INC4.989 Reviews - Member since 2023 · 11 posts · 0 votes1y
Quote from @Jay Hurst:
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hey Jay - I too am asking why :D
My only experience has been with conventional mortgages - I recently purchased my own home with one and since I am a small business owner it was like pulling teeth.
The DSCR loans seem much easier to qualify for, but perhaps there are other loan types out there that are less expensive and also aren't a root canal? (the way the conventional mortgage was a root canal)
I am probably going to pay cash for the property upfront and then finance it after the close, so I have some time to explore financing products. - 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votes
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
Freedom Capital Funding, LLC523 Reviews - Lender · Nashville, TN · Member since 2024 · 700 posts · 284 votes1y
For $120,000 thats more than fair I'd say.
This is a great deal.
- 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Matthew Crivelli:
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
This again. Do you require a personal guarantee?
Hurst Real Estate, INC4.989 Reviews - 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Ian Bower:
Quote from @Jay Hurst:
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hey Jay - I too am asking why :D
My only experience has been with conventional mortgages - I recently purchased my own home with one and since I am a small business owner it was like pulling teeth.
The DSCR loans seem much easier to qualify for, but perhaps there are other loan types out there that are less expensive and also aren't a root canal? (the way the conventional mortgage was a root canal)
I am probably going to pay cash for the property upfront and then finance it after the close, so I have some time to explore financing products.The pain of the root canal depends on the dentist. Same as the experience for the self employed borrower. I am assuming it was a root canal like experience because of the drib and drabs of documentation that that the LO asked for? LO's who are not experienced in general or maybe who just do not work with self employed very often can make the experience much worse then it needs to be. Generally, only 1 or 2 years of business and personal tax returns (depends on how long your business has been around) should be the only additional docs needed for most self employed vs W-2 wage earners.
and the items mentioned above are not relevant for a qualified borrowers (and some are down right incorrect). I have been doing DSCR loans for 10-12 years back when they were called cash flow loans, so when they fit they are a great product (even without the nonsense unlicensed DSCR only brokers say about them like the not on credit report BS) but they are NOT as good as a conventional if one qualifies.
Hurst Real Estate, INC4.989 Reviews - Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes1y
Quote from @Jay Hurst:
Quote from @Ian Bower:
Quote from @Jay Hurst:
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hey Jay - I too am asking why :D
My only experience has been with conventional mortgages - I recently purchased my own home with one and since I am a small business owner it was like pulling teeth.
The DSCR loans seem much easier to qualify for, but perhaps there are other loan types out there that are less expensive and also aren't a root canal? (the way the conventional mortgage was a root canal)
I am probably going to pay cash for the property upfront and then finance it after the close, so I have some time to explore financing products.The pain of the root canal depends on the dentist. Same as the experience for the self employed borrower. I am assuming it was a root canal like experience because of the drib and drabs of documentation that that the LO asked for? LO's who are not experienced in general or maybe who just do not work with self employed very often can make the experience much worse then it needs to be. Generally, only 1 or 2 years of business and personal tax returns (depends on how long your business has been around) should be the only additional docs needed for most self employed vs W-2 wage earners.
and the items mentioned above are not relevant for a qualified borrowers (and some are down right incorrect). I have been doing DSCR loans for 10-12 years back when they were called cash flow loans, so when they fit they are a great product (even without the nonsense unlicensed DSCR only brokers say about them like the not on credit report BS) but they are NOT as good as a conventional if one qualifies.
This. I cant tell you how many times I've had to explain to investors that there is no magic DSCR wand that eliminates the personal credit risk/impact or allows them to borrow 100% of the purchase price or whatever. 99% of DSCRs require a PG which WILL impact DTI on any future loans, whether SBA, mortgage, consumer, etc. Also, Conventional investment loans are better deals 99% of the time. DSCRs are great for when Conventional wont work.
It makes me cringe when investors think that DSCR means they're getting a nonrecourse loan with 100% LTV and cheaper than Conventional (speaking generally here, not referring to OP).
- 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Patrick Roberts:
Quote from @Jay Hurst:
Quote from @Ian Bower:
Quote from @Jay Hurst:
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
My first question is always: Why a DSCR loan? They are more expensive so great if you have to have it, not good if you can do something else.
Hey Jay - I too am asking why :D
My only experience has been with conventional mortgages - I recently purchased my own home with one and since I am a small business owner it was like pulling teeth.
The DSCR loans seem much easier to qualify for, but perhaps there are other loan types out there that are less expensive and also aren't a root canal? (the way the conventional mortgage was a root canal)
I am probably going to pay cash for the property upfront and then finance it after the close, so I have some time to explore financing products.The pain of the root canal depends on the dentist. Same as the experience for the self employed borrower. I am assuming it was a root canal like experience because of the drib and drabs of documentation that that the LO asked for? LO's who are not experienced in general or maybe who just do not work with self employed very often can make the experience much worse then it needs to be. Generally, only 1 or 2 years of business and personal tax returns (depends on how long your business has been around) should be the only additional docs needed for most self employed vs W-2 wage earners.
and the items mentioned above are not relevant for a qualified borrowers (and some are down right incorrect). I have been doing DSCR loans for 10-12 years back when they were called cash flow loans, so when they fit they are a great product (even without the nonsense unlicensed DSCR only brokers say about them like the not on credit report BS) but they are NOT as good as a conventional if one qualifies.
This. I cant tell you how many times I've had to explain to investors that there is no magic DSCR wand that eliminates the personal credit risk/impact or allows them to borrow 100% of the purchase price or whatever. 99% of DSCRs require a PG which WILL impact DTI on any future loans, whether SBA, mortgage, consumer, etc. Also, Conventional investment loans are better deals 99% of the time. DSCRs are great for when Conventional wont work.
It makes me cringe when investors think that DSCR means they're getting a nonrecourse loan with 100% LTV and cheaper than Conventional (speaking generally here, not referring to OP).
Yes. It is starting to burn folks who were told this and then cannot qualify for a house they want to buy to live in. The issue is that if you are not licensed (if no NMLS number= no license) you cannot by law do an owner occupied loan therefore you do not know that the credit report means nothing when it comes to actual debt. (not all debt ever reports to credit bureaus) They do not know that the tax returns will show the income or loss from the LLC, and that there are about 4 different reports other then the credit report that underwriters use to find undisclosed debt.
Hurst Real Estate, INC4.989 Reviews - Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes1y
@Ian Bower for a 120K loan, it's in the range of normal. I would say that the UW fee seems low, but processing fee seems high, but they seem to balance each other out and the admin fee is kind of a junk fee. It's hard when lower balance loans like this because the flat fees like processing and underwriting seem high as a percentage of the loan, but the reality is that it's the same amount of effort (generally) to process/UW a larger loan and a smaller balance loan.
- 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votesWe do require a PG but i never said anything about the loan not affecting DTI. Does a commercial loan show up on your credit report? It doesn't. Everything i stated was factual.
Quote from @Jay Hurst:
Quote from @Matthew Crivelli:
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
This again. Do you require a personal guarantee?
Freedom Capital Funding, LLC523 Reviews - 1yMatthew CrivelliBusiness MemberLender · MA · Member since 2021 · 1k+ posts · 1k+ votesI can also say, after going through a primary purchase through a local credit union just recently. The loan process was painful, drawn out, and required much more documentation then the commercial loans that we write. I would assume the same goes for conventional rental loans and even more so for 203k loans. The commercial loan space continues to grow and after my recent experience I fully understand why. When i see a conventional lender dump on commercial loans i think the same thing as you. "This again"
Quote from @Jay Hurst:
Quote from @Matthew Crivelli:
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
This again. Do you require a personal guarantee?
Freedom Capital Funding, LLC523 Reviews - Rental Property Investor · New Braunfels, TX · Member since 2022 · 408 posts · 408 votes1yThose fees don’t seem that high to me. What interest rate are you getting quoted for those fees though?
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
- Member since 2023 · 11 posts · 0 votes1y
Quote from @Account Closed:
Those fees don’t seem that high to me. What interest rate are you getting quoted for those fees though?Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
I don't have an official estimate but the lender is saying to expect 7.25% maximum, but more likely more like 6.8-7%
- Lender · Member since 2021 · 495 posts · 130 votes1yIan,
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
With the limited of info known, the fees do seem slightly steep. As many have said, DSCR loans are often more out of pocket for borrower paid commission. You can also look at a conventional scenario. A great tool to find a local broker is https://mortgagematchup.com/
if you do want a second look at a DSCR scenario, happy to see if we can help. - Lender · United States · Member since 2020 · 1k+ posts · 499 votes1y
Need more details. I've brokered 300 DSCR loans and I'll tell borrowers to expect closing costs to be 2-3% of the loan amount. However, loans under $200k, it's closer to 3-4%, and loans under $125k, expect around 5%.
Lenders typically have flat fees (UW, legal, etc). Simple math: the lower the loan, the higher percentage of closing.
Those $1M loans are usually 1% closing costs, for example.
- 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Matthew Crivelli:
We do require a PG but i never said anything about the loan not affecting DTI. Does a commercial loan show up on your credit report? It doesn't. Everything i stated was factual.Quote from @Jay Hurst:
Quote from @Matthew Crivelli:
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
This again. Do you require a personal guarantee?
It depends on IF the commercial lender pays to report or not. so do, some don't. and what is the benefit of not being on a credit report? why is that a selling point?
Hurst Real Estate, INC4.989 Reviews - 1yJay HurstBusiness MemberLender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Matthew Crivelli:
I can also say, after going through a primary purchase through a local credit union just recently. The loan process was painful, drawn out, and required much more documentation then the commercial loans that we write. I would assume the same goes for conventional rental loans and even more so for 203k loans. The commercial loan space continues to grow and after my recent experience I fully understand why. When i see a conventional lender dump on commercial loans i think the same thing as you. "This again"Quote from @Jay Hurst:
Quote from @Matthew Crivelli:
We might be able to save you some money on your DSCR loan. Typically we are only charging 0-1pt and 2k in fees.
Overall the closing costs are higher for DSCR loans. The pros to them are vast though, no cap on how many mortgages you hold, they don't show up on your credit report, the closings are quicker, the rates are competitive, we only require a soft credit check, no tax returns or employment requirements, and the seasoning periods a very short. These are the main reasons so many investors have turned to these types of commercial mortgages. This is why @Jay Hurst
This again. Do you require a personal guarantee?
I guess you missed where I said I have been doing DSCR loans for years and have closed 1000's over those years. They are great for borrowers who cannot qualify for another option if they have no verifiable income, already have 10 financed properties, etc. I am just very tired of hearing that a loan not showing up a credit report means anything, because it simply does not. Maybe you understand that but there a lot of non-licensed brokers who do not understand that.
Hurst Real Estate, INC4.989 Reviews - Lender · Kingsville, MD · Member since 2023 · 103 posts · 35 votes1y
Quote from @Ian Bower:
Hi All. First post. First investment property.
Just getting my financial house in order and talking to some lenders.
Most of them are quoting me:
An origination fee - $2500A processing fee - $1000
An Underwriting fee - $1000
Some misc. fee ("Admin") - $500
The numbers change, but ultimately the bottom line is just for the loan, it's $4700-$5500 in fees.
Is this normal for this type of loan? I assume so since that's what everyone is quoting me.I appreciate the help.
Hey Ian,
It is tough to understand their fees without the term sheet. I will say for us on the DSCR lending, our fees are $2100. That includes processing, underwriting, and closing. We are also 2 points in origination on most files.
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes1y
What rate were you seeing now?
- Lender · TX · Member since 2024 · 308 posts · 196 votes1y
Hi Ian, as a DSCR lender, that sounds reasonable to me. You can choose to pay no origination fee, but it will come with a higher rate, which will likely cost you more in the long run.
- Member since 2022 · 30 posts · 18 votes1y
The admin and underwriting fee's seem a little steep. Did they give you any explanation or vindication for each of those? I'd definitely get a second one if possible or better yet, email that to another lender and ask them if those fees meet what they'd charge. That's an apt opportunity to try and get a price match (or less).
- Member since 2023 · 11 posts · 0 votes1y
Quote from @Julia Lyrberg:
Hi Ian, as a DSCR lender, that sounds reasonable to me. You can choose to pay no origination fee, but it will come with a higher rate, which will likely cost you more in the long run.
This was a lightbulb moment for me. Are origination fees just an interest rate buy down?
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