Beware of Too-Good-to-Be-True Rates: The Rise of DSCR Lender & Broker Scams

Last updated: February 27, 2025

This article was written by Svetlana "Ana" Tushevski, Client Success Manager at OfferMarket, in response to a recent rise in concerning, misleading and fake loan terms.

In recent years, DSCR loans have gained popularity among real estate investors looking for flexible financing options without traditional income verification. However, with this growing demand comes a concerning trend—lenders and brokers engaging in misleading tactics, promising artificially low interest rates to attract borrowers while the 5 yr treasury is rising.

Many investors are lured in by the promise of interest rates that seem too good to be true—because they are. In this article, we’ll explore how these deceptive practices work, why they are on the rise, and how real estate investors can protect themselves from falling victim to a DSCR lender or broker scam.

How These DSCR Scams Work

1. The Bait-and-Switch Tactic

Some brokers and lenders advertise unrealistically low DSCR interest rates to capture leads. For example, while the conventional 30-year fixed-rate mortgage is sitting at 6.80%, these lenders might falsely promise DSCR rates of 6.5% or lower without disclosing the fine print.

Once the borrower submits an application and gets deep into the process, they are suddenly hit with unexpected fees, additional conditions, or a completely different interest rate than what was originally promised. At this point, with time, money and effort already invested, many borrowers feel trapped into proceeding anyway.

2. Fake “Rate Locks” That Don’t Exist

Some brokers claim they can lock in a low interest rate immediately—only to later inform borrowers that rates have suddenly “changed.” Unlike conventional finance options, many DSCR lenders do not provide true rate locks until a the borrower's loan application has been underwritten.

Unsuspecting borrowers assume they have secured the original low interest rate, only to find out they are actually being offered a much higher rate when it’s time to finalize the loan.

3. Misleading Rate Buydowns

A legitimate way to lower DSCR interest rates is through a rate buydown, where the borrower pays upfront points to reduce the interest rate. However, some lenders fail to disclose that the advertised “low rate” requires a hefty buydown—often making the loan far more expensive in the long run.

For example, a lender may advertise a 6.5% rate, but in reality, that rate requires the borrower to pay 3-4 points upfront, costing thousands of dollars. If the investor is not aware of this, they may be in for a rude awakening at closing.

4. Working With Unqualified or Dishonest Brokers

Some mortgage brokers operate with little transparency, shopping loans to multiple lenders without disclosing the true costs or terms upfront. These brokers often:

• Hide origination fees
• Inflate interest rates to increase their commission
• Disguise unfavorable loan terms

In the worst cases, brokers may lack experience with DSCR finance altogether, resulting in unrealistic approvals, delays, or outright denials.

Why This Scam Trend Is Growing

1. Rising Interest Rates

In a rising and elevated interest rate environment with low transaction volume, unethical and fraudulent brokers desperate for income will advertise artificially low DSCR interest rates to attract attention and generate leads.

2. More New Investors Entering the Market

With real estate investing growing in popularity, many first-time investors are unfamiliar with how DSCR finance works. Scammers prey on this lack of knowledge, making promises that experienced investors would immediately recognize as red flags.

3. Lack of Industry Regulation

Unlike conventional finance options, DSCR loans fall under private lending standards, meaning they are less regulated. This allows some lenders and brokers to engage in deceptive marketing without facing the same level of scrutiny as traditional banks and mortgage companies.

How to Protect Yourself from DSCR Lender & Broker Scams

1. Research Market Rates & Compare Offers

Before engaging with any lender or broker, investors should research current DSCR loan rates from multiple sources. If one offer seems significantly lower than others, it’s likely a red flag.

2. Ask for a Loan Estimate Upfront

A legitimate lender should be willing to provide a Loan Estimate (LE) or a detailed term sheet outlining:

• Interest rate
• Loan-to-value (LTV) ratio
• Fees and costs
• Prepayment penalties

If they hesitate to provide this information or make excuses, walk away!

3. Verify the Rate Lock Policy

Investors should ask in writing whether the lender offers a rate lock and under what conditions. If the lender says the rate is locked but later changes it without explanation, that’s a major red flag.

4. Be Cautious of High Upfront Fees

Some fraudulent lenders require large deposits or fees before issuing terms. A reasonable deposit may be required for an appraisal, but excessive fees without clear documentation should be avoided. Nearly all DSCR loan programs require the appraisal to be managed by a 3rd party Appraisal Management Company (AMC) so your appraisal fee should be invoiced by the AMC, not by the DSCR lender.

5. Work With Reputable Lenders

Look for lenders and brokers with a proven track record, real customer reviews, and clear communication. Beware of anyone unwilling to provide references or loan examples.

Term Sheet Analyzer

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To go the extra mile to do our part to, we now offer a service called Term Sheet Analyzer. Simply submit your loan request through the above link and we will collect and thoroughly review any 3rd party term sheet to let you know if it's legitimate and how it compares to OfferMarket's always transparent, always competitive loan terms.

DSCR Loan Rate Update

Final Thoughts

The DSCR loan market provides a valuable financing option for real estate investors, but it’s also an area where deceptive practices are on the rise. If you’re an investor, staying informed and vetting lenders carefully is crucial to avoiding scams.

At OfferMarket, we prioritize transparency, competitive pricing, and investor-focused solutions. If you have questions about DSCR finance or need a trusted lending partner, reach out to us today—we’re here to help you secure financing with confidence.

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