1) Don't overestimate rent — the appraiser's Form 1007 sets it, not you. 2) Match the prepayment penalty to your hold. 3) Stop chasing the headline rate — structure and LTV matter more. The rest are below. See Requirements and How to Qualify.
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Ratio & rent mistakes
1. Overestimating the rent
Underwriting uses the appraiser's market-rent schedule (Form 1007) or your lease — not your projection. Pull real comps and be conservative. See the process →
2. Misjudging the DSCR threshold
Assuming 1.0 is fine when the best pricing needs 1.25+. Know which tier you're targeting before you write the offer.
3. Forgetting PITIA is the full payment
DSCR uses taxes, insurance, and HOA, not just principal and interest. High CA property taxes or HOA dues can sink a ratio you thought was fine.
4. Trusting projected STR income at face value
Lenders now haircut short-term-rental projections or use long-term market rent. Make sure the deal works after the haircut.
Cost & structure mistakes
5. Ignoring the prepayment penalty
Most DSCR loans have a step-down penalty (often 5 years). Selling or refinancing early without planning for it is expensive. Match it to your hold.
6. Fixating on the headline rate
A lower rate at 70% LTV can be worse than a slightly higher rate at 80% if the leverage frees capital for the next deal. Price the whole trade. Rates →
7. Maxing leverage without a reason
80% LTV costs more in rate and reserves. If you don't need the capital elsewhere, more down often prices better.
8. Overlooking junk fees
Some lenders offset a low rate with high fees. Compare total cost, not just the rate.
Process mistakes
9. Skimping on reserves
DSCR wants 3–6 months of PITIA. Draining reserves for the down payment can fail the file — count retirement/investment accounts instead.
10. Wrong vesting decision
Deciding LLC vs personal after escrow opens causes title and entity-doc scrambles. Choose early. Eligibility →
11. Assuming credit doesn't matter
"They don't check income, so my score is irrelevant" is false — with no income to judge, credit is the primary risk signal and drives your rate.
The Don't / Do checklist
| Don't | Do |
|---|---|
| Estimate rent optimistically | Pull real comps; expect Form 1007 to rule |
| Assume 1.0 gets best pricing | Target 1.25+ for the best tier |
| Forget taxes, insurance & HOA | Use full PITIA in your DSCR math |
| Trust raw STR projections | Stress-test after the lender's haircut |
| Ignore the prepay penalty | Match it to your hold period |
| Chase the lowest headline rate | Price rate + LTV + structure together |
| Max LTV by default | Bring more down if you don't need the cash |
| Compare rate only | Compare total cost including fees |
| Drain reserves for the down payment | Keep 3–6 months of PITIA |
| Decide vesting late | Choose LLC vs personal upfront |
| Neglect your credit | Push toward 740+ before applying |
DSCR mistake FAQs
Most common mistake?
Overestimating rent — the appraiser's Form 1007 or your lease sets it, not your projection.
Do investors underestimate prepay penalties?
Often — many loans have a multi-year step-down. Plan for it if you'll sell or refi early.
Is fixating on rate a mistake?
Yes — ignoring LTV, structure, and cash flow to chase a headline rate often backfires.
Can I fix a sub-1.0 DSCR?
Usually — more down or interest-only lowers the payment and lifts the ratio above 1.0.
Reviewed by the licensing team at Save Financial, a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) founded in 2009 and serving all 58 counties from offices in Newport Beach and Marina del Rey.