How can I improve my DSCR ratio to qualify for a better rate?
Raise rent, appeal property tax assessment, shop insurance, refinance into a longer term, or lower loan amount. Each move increases the DSCR calculation.
DSCR = monthly rent / monthly PITIA (Principal + Interest + Taxes + Insurance + HOA). Five practical moves to improve the ratio: (1) Raise rent to market - pull comparable rents from local listings, see if you're below market, and raise at next lease renewal. A $200/month rent increase on a $2,000 PITIA property moves DSCR from 1.10 to 1.20. (2) Appeal property tax assessment. Many counties over-assess investment property; appeals win in 30-50% of cases with proper documentation. Tax savings of $1-3K/year directly reduce PITIA. (3) Shop insurance. Most investors over-pay 20-30% on landlord/dwelling fire policies. Get 3 quotes from independent agents. (4) Refinance to a longer amortization. If you're at 25-year amortization, switching to 30-year reduces the P&I component (with a small total-interest cost). (5) Lower the loan amount. Pay down principal, accept a smaller refinance, or buy with more cash down. Each $10K reduction in loan balance reduces PITIA roughly $60-80/month. Combine moves: rent +$200, tax appeal $1.5K/year ($125/month), insurance shop $50/month savings = $375/month improvement. Often enough to move into a better DSCR pricing tier.
People also ask
How much DSCR improvement moves me into a better rate tier?
Typical tiers: 1.0-1.10 (low-DSCR), 1.10-1.25 (standard), 1.25+ (best pricing). Moving from 1.05 to 1.20 saves 0.25-0.5% on rate.
Can I include "future" rent if I plan to raise it?
No. Lender uses lower of actual lease rent OR market rent from 1007 appraisal. Future planned increases not credited until lease is signed at the new rate.
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