Tax write offs and principal paydown are the main drivers.

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).

I wanted to confirm that to date they have never missed a payment and always returned principal?

At $234k, you're paying roughly $1,090/month in principal and interest at 3.8%, versus $1,440/month at 6.25%.

Should we aggressively pay down the principal and refi? 

The 30-year fixed rate today is 5.77%.This time last year it was 6.87%.That 1.1% drop translates into roughly $35,000–$40,000 more purchasing power for a buyer with a $3,000/month principal and interest budget.Same income.Same credit.More house.That’s a meaningful shift in leverage.When affordability expands, opportunity expands with it.

Hopefully you had a heart to heart with your Agent and/or his Principal to get reimbursed!

I personally think you'll have better luck looking for a 2 unit because if you are thinking about going with a low down payment (FHA or 5% conventional) then you won't have to go up against the self-sufficiency test, which basically requires your rent to cover 75% of your principal, interest, taxes and insurance including the unit you'd stay in.Just curious how did you connect with your current agent and lender?

Would the end result be return of principal?

I've included an example below to help illustrate this.So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.See example below:DSCR < 1Principal + Interest = $1,700Taxes = $350, Insurance = $100, Association Dues = $50Total PITIA = $2200Rent = $2000DSCR = Rent/PITIA = 2000/2200 = 0.91Since the DSCR is 0.91, we know the expenses are greater than the income of the property.DSCR >1Principal + Interest = $1,500Taxes = $250, Insurance = $100, Association Dues = $25Total PITIA = $1875 Rent = $2300DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable).