DSCR Rates Are Tightening — Here's What That Means for Investors

DSCR Rates in Q1 2026: The Landscape

The DSCR lending market has shifted meaningfully in the first quarter of 2026. After months of relative stability, rates have ticked up across most non-QM lenders, and buy boxes are tightening.

Where Rates Stand Now

As of March 2026, typical DSCR loan rates are:

1.25+ DSCR, 720+ credit: 7.25% - 7.75%

1.0 - 1.24 DSCR, 700+ credit: 7.75% - 8.25%

Sub-1.0 DSCR programs: 8.5% - 9.25%

That's roughly 25-50 basis points higher than Q4 2025 across the board.

What's Driving the Increase

Several factors are contributing:

Securitization spreads widened — The secondary market for non-QM MBS has seen spread widening, which flows directly to borrower rates

Delinquency uptick — A small but notable increase in DSCR loan delinquencies in certain markets (Florida, Arizona) has made lenders more cautious

Insurance costs — Property insurance increases are compressing DSCR ratios, which means the same property that was a 1.25 DSCR last year might be a 1.1 today

Where Deals Still Work

Despite tighter conditions, deals are still getting done. The sweet spots:

Midwest markets — Lower property values mean higher DSCRs even at current rates. Indianapolis, Columbus, and Kansas City remain strong

2-4 unit properties — Multi-unit properties often have better DSCR ratios than single-family

Value-add with lease-up — Properties where rent can be increased to improve DSCR post-close

Cash-out refi on appreciated assets — Investors sitting on equity from 2020-2022 purchases can still pull cash at reasonable LTVs

Our Recommendation

Don't wait for rates to come down. The deals that work today should be locked in. Focus on properties where the DSCR is 1.2 or higher at current rates, and make sure your insurance quote is current — stale insurance estimates are killing deals in underwriting.