As a realtor and investor, I have personally used DSCR financing many times and have represented clients who have used the same type of financing on their deals. In a high interest rate market like the one we have now, it's very common for buyers to shop around for the best DSCR pricing. While it is important to get the best rate, it is also important to understand whether the pricing you're getting from lenders is a direct apples-to-apples comparison. The best way to know for sure that you are getting direct comparisons, and not being hooked by a low interest rate, is to first and foremost obtain a loan estimate and term sheet from your lender and compare it across the board.

It is really common in this field to see buyers switch to a lender after being hooked by a very enticing, low interest rate — but when it comes to closing and settlement, their rate magically changes because the terms that were initially quoted were not meant for the DSCR financing that was ultimately offered.

This is why it's really important to ask each lender you're getting quotes from these five questions:

1. What down payment are you using to estimate my interest rate? This might seem like a silly question to ask, but the difference between a 20% down payment and a 25% down payment for DSCR financing can actually move your interest rate by a quarter of a point. Lenders will often use the tactic of quoting a higher down payment to pull you in with a lower interest rate.

2. What credit score are you using to estimate my rate? Lenders will often use the highest credit tier to give you an interest rate estimate. What many people don't know is that if your credit score comes back even slightly lower, your interest rate can change drastically. If your lender is quoting you based on a credit score of 780 and above, and your credit comes in at 775, your interest rate will be different. Of course, it's not the lender's fault what your credit comes back at — but they need to give you a realistic picture of what each scenario might look like.

3. Are you quoting me with a prepayment penalty? This is often the one that flies most under the radar. Lenders will quote prospective buyers DSCR financing with the longest prepayment penalty option available. A prepayment penalty is a period of time during which, if the loan is paid off within that window, you'll face a penalty. The longer the prepayment penalty term, the better the interest rate. The difference between the rate on a loan with a five-year prepayment penalty and one without can be drastic — sometimes half a point or more. Make sure you know exactly what prepayment penalty is being quoted to you, and know the other terms available: what does a 3-year prepayment penalty look like, a 2-year, etc.? Make sure you're comparing equally across quotes.

4. What DSCR ratio are you quoting? This is another metric that can drastically change your interest rate. Lenders will often increase this ratio to make the interest rate more enticing. The reason the interest rate goes down as the ratio goes up is because the bank takes on less risk — the gap between the rent and the mortgage payment is larger. If one lender is quoting you a DSCR ratio of 1.25 and another is quoting 1.00, you're not getting an apples-to-apples comparison. The best way to understand what your DSCR ratio will be is to know the market rents in the area versus the current rents. If the current rents are lower than market, it's likely the lender will use those to determine the ratio.

5. Are you able to use market rents, or only actual rents, to determine the DSCR ratio? Most DSCR financing uses actual rents to determine the ratio. Unfortunately, when people are buying assets with long-term tenants, the rents could be significantly under market value — lowering the DSCR ratio and increasing your interest rate. It's important to ask, and get in writing, whether there's an ability to use market rents instead, which can be more favorable in this scenario.

By asking these five questions, you'll be a lot more prepared and will know the exact terms you're getting — avoiding any bait-and-switch at settlement. Getting quoted the best interest rate isn't always in your best interest. Ask these questions, understand what you're actually being quoted, and know that a lender who addresses these issues upfront, before giving you a quote, is a good sign you're dealing with an honest business.

Best of luck.