Q1 2026 DSCR Rate Recap and What's Driving Q2

Where Q1 Started and Where It Ended

DSCR pricing entered 2026 in a holding pattern. Lenders had spent late 2025 absorbing a wave of new capital and were testing how aggressive they could be without losing margin. By the end of Q1, that test was over.

We saw three things happen across the quarter:

Headline rates compressed 40-60 bps on standard 75% LTV, 740+ credit, 1.25+ DSCR scenarios from January to late March

No-ratio and sub-1.0 programs widened — more lenders are offering them, and the rate premium over standard DSCR shrank by 25-50 bps

Interest-only products came back at competitive pricing, not just as a niche overlay

If you priced a deal in early January and again in late March, you likely saw a meaningfully better rate sheet the second time — even with no change to the borrower profile.

Credit Tier Compression

The most interesting Q1 development was not at the top of the credit stack. It was in the middle.

740+ credit: Improvement of 25-40 bps quarter over quarter. Already the best tier, so the move is smaller in absolute terms.

720-739 credit: Improvement of 35-50 bps. The gap to 740+ pricing narrowed at several lenders.

700-719 credit: Improvement of 50-75 bps. This is where competition got real. Lenders are fighting for the slightly-below-prime borrower.

660-699 credit: Improvement of 30-50 bps. Still a meaningful premium to top tier, but the absolute rate dropped enough to bring deals back into qualification range.

If your borrower scored 705 in January and you got a no-go on DSCR because the rate killed cash flow — re-run it. The same scenario in late March may pencil.

Programs That Got More Competitive

Three product areas saw real movement in Q1:

No-Ratio DSCR

These programs do not calculate DSCR at all. Qualification is based on credit, LTV, and reserves. In Q1 2025, you might pay 100-150 bps over standard DSCR for a no-ratio program. In Q1 2026, that premium is closer to 50-100 bps at competitive lenders.

Why it matters: investors with strong credit and reserves who own properties that do not cash flow on paper (negative leverage in expensive markets, recent rent dips, vacancy at the time of underwriting) now have a real path to financing without forcing the DSCR math.

Sub-1.0 DSCR

For deals that calculate at 0.75-0.99 DSCR, more lenders entered the space in Q1. The rate premium over 1.0+ DSCR compressed from 75-125 bps to roughly 50-75 bps at the better-priced shops. Reserve requirements stayed the same (typically 12 months PITI), but more lenders are willing to look.

This is opening up a class of deal that simply did not get done a year ago — properties with strong fundamentals but soft current rents, or value-add deals where the borrower needs financing before the rent bump materializes.

Interest-Only

Interest-only DSCR is back at meaningful scale. The 10-year IO period is the most common offering, with rates running roughly 25-40 bps above amortizing on equivalent profiles.

Two reasons investors are using IO right now:

Cash flow boost on tight DSCR deals. Calculating DSCR on the IO payment instead of the fully amortizing payment lifts your ratio meaningfully — often enough to push a 0.95 deal into 1.10+ territory.

Maximizing cash-on-cash for shorter holds. If you plan to refi or sell in 5-7 years, IO frees up capital each month for additional acquisitions.

LTV Pricing Shifts

The 75% LTV tier remained the standard. The notable Q1 movement was at the edges:

80% LTV: The premium over 75% LTV compressed from 35-50 bps to roughly 25-35 bps at competitive lenders. If you needed maximum leverage, you paid less for it in late March than in early January.

65-70% LTV: The discount versus 75% LTV widened at a few lenders, with 25-50 bps off pricing for borrowers who could put more down. If you have the capital and are pricing-sensitive, the lower-LTV path improved.

What's Driving Q2

Three forces are shaping Q2 pricing:

1. Continued capital inflow. Securitization spreads tightened through Q1, which means lenders can fund DSCR loans more cheaply and pass some of that savings to borrowers. We expect this to continue into Q2 unless macro spreads widen.

2. Competition for prime borrowers. Top-tier credit and DSCR scenarios are the most contested. If you fit the 740+ / 1.25+ / 75% LTV box, expect lender outreach and aggressive pricing. Get multiple quotes — the spread between best and worst lender on the same scenario can be 50+ bps.

3. Program experimentation. Several lenders are piloting 40-year amortization, 5/6 ARM products at meaningful discounts to 30-year fixed, and expanded no-ratio to 80% LTV. These are not all permanent yet, but the menu is widening.

What This Means for Your Strategy

If you are an investor sitting on properties you priced in 2024 or early 2025:

Refi candidates exist. Even without a rate-cut cycle, the rate sheet improvement plus any tightened LTV math may put you in better terms than your current note.

Cash-out refi pencils on more deals. Compressed pricing means the equity pull does not eat as much into cash flow.

Acquisition windows are real. If you have been waiting for "the right rate," late Q1 and Q2 are giving you something close to it.

If you are a broker:

Re-quote scenarios you killed in Q4 2025. Many of them work now.

Pay attention to no-ratio and sub-1.0 — your "too tight to fund" pile likely has live deals in it.

Pricing speed matters. If you cannot get a same-day scenario response from your lender, you are losing deals to whoever can.

Get a Current Q2 Quote

Submit a scenario through our DSCR scenario form or call (917) 993-9194. We will run live Q2 pricing across our program shelf and give you a written assessment within 24 hours.