Total Closing Cost Overview
DSCR loan closing costs typically range from 2-4% of the purchase price, similar to conventional investment property loans. However, the specific fees and their amounts can vary significantly by lender, location, and loan program.
Typical Closing Cost Range
| Purchase Price |
Low End (2%) |
Average (3%) |
High End (4%) |
| $200,000 |
$4,000 |
$6,000 |
$8,000 |
| $400,000 |
$8,000 |
$12,000 |
$16,000 |
| $600,000 |
$12,000 |
$18,000 |
$24,000 |
| $800,000 |
$16,000 |
$24,000 |
$32,000 |
Lender Fees
Origination Fee
The primary lender fee for processing your DSCR loan application.
- Typical range: 0.5% - 2.0% of loan amount
- Average: 1.0% - 1.5%
- $400,000 loan example: $4,000 - $6,000
- Sometimes negotiable based on loan size and borrower profile
Processing & Underwriting Fees
Common Lender Fees
- Application Fee: $0 - $500 (many lenders waive this)
- Processing Fee: $300 - $800
- Underwriting Fee: $400 - $1,200
- Wire Transfer Fee: $25 - $50
- Document Preparation: $200 - $500
Rate Lock & Credit Report
- Rate Lock Fee: $0 - $500 (for extended lock periods)
- Credit Report: $25 - $75
- Rate Lock Extension: 0.125% - 0.25% of loan amount (if needed)
Third-Party Services
Appraisal Costs
Investment property appraisals are typically more expensive than primary residence appraisals due to the income analysis required.
Appraisal Fees by Property Type
| Property Type |
Typical Fee |
Timeline |
| Single-Family Home |
$450 - $700 |
5-10 days |
| Duplex/Triplex |
$700 - $1,200 |
7-14 days |
| Fourplex |
$1,000 - $1,500 |
10-14 days |
| 5+ Units |
$2,000 - $5,000+ |
14-21 days |
| Complex/Unique Properties |
$1,500 - $3,000+ |
14-28 days |
Title & Escrow Services
Title insurance and escrow services protect both buyer and lender in the transaction.
- Title Search: $200 - $500
- Title Insurance (Lender's Policy): $500 - $2,000 (varies by state and loan amount)
- Title Insurance (Owner's Policy): $500 - $2,500 (optional but recommended)
- Escrow/Closing Fee: $300 - $800
- Document Recording: $50 - $300
- Notary Fees: $50 - $200
Property Inspection
While not always required for DSCR loans, property inspections are highly recommended for investment properties.
Inspection Considerations
- General Property Inspection: $300 - $600
- Termite/Pest Inspection: $100 - $300
- Specialized Inspections: $200 - $500 each (roof, HVAC, electrical)
- Environmental (if required): $400 - $1,200
- Survey (if required): $400 - $1,000
Note: Inspection costs are typically paid directly by buyer, not rolled into closing costs
Government Fees & Taxes
Transfer Taxes & Recording Fees
These vary significantly by state and local jurisdiction.
Transfer Tax Examples by State
| State |
Transfer Tax Rate |
$400k Property Example |
| Florida |
$0.70 per $100 |
$2,800 |
| Texas |
None |
$0 |
| California |
$1.10 per $1,000 |
$440 |
| New York |
$2.00 per $500 |
$1,600 |
| Pennsylvania |
1% of purchase price |
$4,000 |
Prepaid Expenses
Property Insurance
Investment property insurance must be paid in advance and is more expensive than homeowner's insurance.
- Annual Premium: $800 - $3,000+ (varies by location and coverage)
- Escrow Required: Most lenders require 2-6 months in escrow account
- Dwelling Protection: Higher liability limits for rental properties
- Loss of Rents: Optional coverage for rental income loss
Property Taxes
Property taxes are typically prorated between buyer and seller, with buyer responsible for their portion at closing.
Property Tax Timing
- Proration: Buyer pays from closing date through end of tax year
- Escrow Setup: 2-6 months collected for escrow account
- Assessment Changes: Investment properties may be reassessed at purchase price
- Homestead Loss: Previous owner's homestead exemption typically doesn't transfer
Interest & PMI
- Prepaid Interest: From closing date to end of month
- PMI (if applicable): Some DSCR programs require mortgage insurance
- HOA Fees: Prorated if applicable
State-Specific Variations
High-Cost vs Low-Cost States
Higher Closing Cost States:
- New York: High transfer taxes and attorney fees
- Pennsylvania: 1% transfer tax
- Washington: High excise taxes
- Delaware: High transfer taxes
Lower Closing Cost States:
- Texas: No state income tax or transfer taxes
- Nevada: Relatively low fees
- Tennessee: Lower overall costs
- Indiana: Minimal government fees
How to Reduce Closing Costs
Negotiation Strategies
- Shop multiple lenders: Compare Loan Estimates (LE) carefully
- Negotiate origination fees: Larger loans have more room for negotiation
- Seller concessions: Ask seller to cover some closing costs
- Lender credits: Accept slightly higher rate for lender to pay fees
- Bundle services: Some companies offer package deals
Timing Considerations
- Close near month-end: Reduces prepaid interest
- Time property tax cycles: Understand local assessment schedules
- Insurance shopping: Get quotes 30 days before closing
Sample Closing Cost Breakdown
$500,000 Purchase Price - $400,000 DSCR Loan
| Cost Category |
Amount |
% of Purchase |
| Origination Fee (1.25%) |
$5,000 |
1.0% |
| Processing/Underwriting |
$1,200 |
0.24% |
| Appraisal |
$650 |
0.13% |
| Title Insurance & Escrow |
$2,800 |
0.56% |
| Transfer Taxes/Recording |
$1,200 |
0.24% |
| Property Insurance (1 year) |
$1,800 |
0.36% |
| Property Taxes (6 months) |
$2,500 |
0.50% |
| Prepaid Interest |
$850 |
0.17% |
| Miscellaneous Fees |
$400 |
0.08% |
| Total Closing Costs |
$16,400 |
3.28% |
Budgeting for Your Investment
Total Cash Required Formula
Total cash needed for investment property purchase:
- Down Payment (20-30% typical)
- + Closing Costs (2-4% of purchase price)
- + Property Inspection (optional, $400-$1,000)
- + Initial Repairs/Improvements
- + Cash Reserves (2-6 months PITI)
- = Total Cash Investment
$500,000 Property Example:
- Down Payment (25%): $125,000
- Closing Costs: $16,400
- Inspections: $800
- Initial Repairs: $5,000
- Reserves: $8,000
- Total: $155,200
Course Complete!
Congratulations on completing the 201-level course! You now understand property types, strategies, DSCR optimization, and costs. Ready for advanced topics? Continue to 301: Portfolio Scaling.