If you’ve been waiting for rates to drop before buying your next rental, this week’s numbers send a clear message: don’t plan around it.
Freddie Mac’s 30-year average held at 7.40% last week, more than a full point above where it was a year ago. The 10-year Treasury, which mortgage rates tend to follow, touched its highest level since 2002 earlier this month and is still near 5.1%. The Federal Reserve raised rates in September for the first time since 2023, and its own projections point to one more increase before year-end. Markets expect a hold at the October 27–28 meeting, not a cut.
That sounds like bad news for investors. It’s really a different set of rules, and DSCR loans are built for exactly this kind of market.
Why DSCR still works when rates are high
A DSCR (debt service coverage ratio) loan qualifies the property, not your tax returns. The lender asks one main question: does the rent cover the payment? Divide the monthly rent by the monthly PITIA (principal, interest, taxes, insurance and HOA). A ratio of 1.0 means the rent exactly covers it. Higher is better.
When rates rise, the payment rises and the ratio gets tighter. But a few things work in investors’ favor right now:
- Rents are still climbing. The shelter component of inflation was up 3.2% year over year in September’s CPI report. Rising rents help offset rising payments.
- Higher rates keep would-be buyers renting longer. That supports occupancy and rent growth on single-family and small multifamily rentals.
- No DTI, no tax returns. If your write-offs make your income look thin on paper, a DSCR loan sidesteps that entirely.
Four ways to make the numbers work this month
- Put a little more down. DSCR pricing usually improves at lower loan-to-value. Going from 80% to 75% LTV can lower your rate and your payment at the same time.
- Target a stronger ratio. Many lenders price the best terms for a DSCR of 1.25 or higher. Ratios between 1.0 and 1.25 typically carry a modest rate add-on.
- Look at interest-only. An interest-only period lowers the payment used in the ratio, which can turn a 0.95 into a 1.1. It usually costs a bit more in rate, so run both.
- Buy points only if you’ll hold. If you plan to keep the property 7+ years, buying down the rate can pay off. If you might refinance when rates ease, keep your cash.
Illustrative example: same rental, three structures
| Structure | Loan amount | Monthly payment (PITIA) | DSCR |
|---|---|---|---|
| 80% LTV, fully amortizing | $320,000 | $2,738 | 1.10 |
| 75% LTV, fully amortizing | $300,000 | $2,598 | 1.15 |
| 75% LTV, interest-only | $300,000 | $2,375 | 1.26 |
Illustrative example only, not a quote or an offer. Assumes a $400,000 purchase, $3,000 monthly rent, a hypothetical 7.5% rate, 30-year amortization, and $500 per month for taxes and insurance. Your actual rate and terms will differ.
The rent and rate are the same in all three cases. Putting 5% more down and choosing interest-only moves the same property from a thin 1.10 into the strongest pricing tier.
What to watch this week
Housing starts and pending home sales come out Tuesday, October 20, and jobless claims follow Thursday. A softer labor or housing number could ease Treasury yields a little, but don’t build your deal on a rate drop. Build it on today’s rate, and treat any improvement as upside.
The bottom line
The investors who do well in a 7% market are the ones who underwrite at 7%. If the rent covers the payment at today’s rates, you have a deal. If it doesn’t, a different structure might get you there.
Ready to run your numbers? Send us the property address, expected rent and purchase price. We’ll show you the DSCR, the payment, and the structure that fits. Get a free DSCR quote or call (866) 569-2877. Learn more about DSCR loans.
Market data as of October 19, 2026: Freddie Mac Primary Mortgage Market Survey (Oct 15), U.S. Treasury, Federal Reserve, BLS CPI (September). American Prime Rate LLC, NMLS# 2421810. For business-purpose investment properties only. Rates, terms and programs are subject to change without notice. Not a commitment to lend. All loans subject to credit approval and property eligibility.