🤔How does Loan Size (Loan Dollar Amount) affect DSCR Loan Pricing (Interest Rate and Terms)?

➡️Loan size plays a surprisingly important role in DSCR loan pricing. DSCR Lenders also care quite a bit about the amount of the loan. Most DSCR Lenders have a defined “sweet spot” when it comes to loan size where the best rates and terms lie. Like the famous Goldilocks and the Three Bears fable, the ideal loan size for DSCR Lenders is typically between the extremes, not too big and not too small.

The ideal loan amount range for most DSCR Lenders falls between $250,000 and $750,000. Loans with these amounts strike the best balance of risk and liquidity. If a default or foreclosure were to occur, properties in this price band are the most marketable, i.e. there’s a much larger pool of potential buyers actively shopping in this segment, which improves recovery prospects in case of foreclosure. On the rental side, properties at these values also align with market rents affordable to a wider range of tenants, meaning the lender has greater confidence that the property will stay leased, the DSCR ratio will remain positive and monthly payments will be made.

If a DSCR Loan falls outside this range, either significantly smaller or larger, it's still eligible with most DSCR Lenders. While it will have only slightly worse pricing, typically around 0.25% higher in rate, there will typically be much tighter LTV restrictions, similar to the treatment of cash-out refinances. In many cases, that means a maximum LTV that's 5–10% lower than what would be allowed for a moderate-sized loan with otherwise identical terms.

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