Investor lending specialists · DSCR, bridge, fix & flip & multi-family
You submitted a scenario, and a term sheet came back. It is a page or two of numbers and conditions, and it is the document that determines what this loan will actually cost you and what you are agreeing to.
Most investors skim it for the rate. That is understandable and it is a mistake — several other lines carry more financial weight than a modest rate difference, and a few determine whether you can execute your plan at all.
The Pricing Lines
Interest rate
The headline number, and the one most likely to be conditional. Rates in this market are tiered by credit score, coverage ratio, leverage, and the prepayment term you accept. Check whether the quoted rate assumes conditions your file actually meets — a rate priced for a 1.30 ratio is not your rate if your property comes in at 1.10.
Origination points
Charged as a percentage of the loan amount and paid at closing. Points hit your cash rather than your monthly payment, which matters because closing cash is what limits how many deals you can do in a year. One point on a $400,000 loan is $4,000 that is not available for your next down payment.
Rate lock
How long the quoted pricing holds. If your closing timeline runs past the lock period, you may reprice at whatever the market is doing then. Confirm the lock length and what an extension costs.
The Structural Lines
Loan-to-value
Determines your down payment. Watch for LTV that varies by scenario — short-term rentals, certain property types, and lower coverage ratios frequently carry tighter caps than a lender's headline maximum.
Amortization and term
Thirty-year fixed is common in DSCR lending, as are ARM structures and interest-only periods. Interest-only lowers the payment used in the coverage calculation, which can lift a marginal ratio above a lender's floor — useful, but understand what happens when the interest-only period ends.
Prepayment penalty
The line investors most often skim and most often regret. Step-down structures declining over the first several years are standard. The interaction with rate is direct: a longer penalty term typically buys a lower rate, and buying the penalty out costs rate.
Neither is universally right. If you are holding long-term, a penalty period you will never trigger costs you nothing and bought you a better rate. If you plan to refinance in eighteen months, that same penalty can exceed several years of rate difference. The error is not picking one — it is picking without checking it against your own exit plan.
Reserve requirement
Cash you must hold after closing, usually expressed as months of principal, interest, taxes, insurance, and dues. Reserves never appear in a rate comparison, but they tie up capital you might otherwise deploy. For a scaling investor this is a real constraint.
The Conditions Section
Below the numbers sits a list of conditions — appraisal, title, insurance requirements, entity documentation, sometimes a lease or rent schedule. Read these carefully, because they are where timelines break.
Two worth particular attention:
- Appraisal and rent schedule. If underwriting uses an appraiser's market rent estimate rather than your actual lease, your coverage ratio may be calculated on a lower number than you expected. Ask which figure they will use.
- Insurance requirements. Minimum coverage levels, and in some markets specific flood or wind requirements, can materially change your carrying cost. Get the requirement before you budget the property.
What Is Usually Negotiable
Not everything on a term sheet is fixed. In practice, the most commonly adjustable elements are the trade-offs rather than the absolutes:
- Rate against points. Most lenders will move one to move the other. Which direction serves you depends entirely on your hold period.
- Rate against prepayment term. Accepting a longer penalty usually improves pricing.
- Leverage against pricing. Lowering LTV often moves you into a better tier, sometimes enough to offset the additional down payment over the hold.
What is rarely negotiable: a lender's minimum coverage ratio, their loan size floor and ceiling, their property type scope, and their reserve policy. These are program parameters rather than pricing decisions, which is why hitting one of them usually means finding a different lender rather than negotiating.
Comparing Two Term Sheets
To compare offers meaningfully, line them up on five dimensions rather than one:
- Rate, confirmed against your actual file rather than a best-case tier
- Total cash at closing, including points and fees
- Prepayment structure, measured against your realistic hold period
- Reserves, as capital tied up after closing
- Conditions, particularly anything that affects your timeline
Then apply your actual plan. A term sheet that looks more expensive on rate can be materially cheaper in total if you exit before a competing loan's prepayment penalty burns off. We cover this arithmetic in more depth in our guide to DSCR loan costs beyond the rate.
Ask Before You Sign
Any lender should be willing to walk you through their own term sheet. If a line is unclear, ask what it means and what it costs. If you cannot get a straight explanation of a document before signing it, that tells you something about how the rest of the process will go.
We will walk through any term sheet with you — including one from another lender. Not as a sales exercise, but because an investor who understands what they are signing makes better decisions, and that is good for everyone involved. Send it over and we will give you a straight read, typically within 24 hours.
For related reading, see our DSCR lender comparison guide and the questions worth asking before you apply.