Investors have spent 2026 asking me one question. When is the Fed going to move, so they can buy.
It is the wrong question. The Federal Open Market Committee meets Tuesday and Wednesday, September 15 and 16, and announces at 2:00 p.m. Eastern on Wednesday with a fresh Summary of Economic Projections. I am not going to tell you what it will do, and this post will still be correct on Thursday whatever it does. Because the number those investors are watching is not the number that sets a DSCR rate, and the numbers that do set it have been sitting on a rate sheet in front of them all year.
What fed funds actually is
The federal funds rate is the rate banks charge each other to borrow reserves overnight. It is the shortest point on the entire yield curve, one night long. The committee sets a target range for it, currently 3.50 to 3.75 percent, held at the July meeting, and it moves that range in steps of a quarter point.
That is the whole definition. It is not a mortgage rate. It is not an index on a 30-year fixed loan. It is the price of money for one night, between banks.
What a DSCR rate sheet actually looks like
Most investors have never seen a wholesale sheet, and they assume it shows a rate. It does not. It shows a ladder.
The ladder is a column of rates against a column of prices. Price is what the lender will pay, or charge, for a loan at that rate, expressed against 100. A price of 100 is par: the lender funds the loan at face value. A price above 100 means the lender pays a premium for the loan at that rate, which comes back to the borrower as a credit toward closing costs. A price below 100 means the borrower pays the difference, in points, to get that rate.
Then there is a grid of adjustments. Credit band. Coverage tier. Leverage. Loan size. Purpose. Property type. Prepayment term. Each one adds or subtracts from price. Not from rate. From price. The adjustments stack into one net number, you carry that number to the ladder, and the ladder tells you which rate your file lands on at par.
On the wholesale business-purpose DSCR sheet I am working from, dated September 11, 2026, thirty-year fixed, one to four units, par is 6.625 percent. From there through 7.500 percent the ladder moves 0.500 in price for every 0.125 in rate. So a point of price is worth about a quarter point of rate in that band. Above 7.500 percent the step narrows to 0.375 in price per 0.125 in rate, and a point buys closer to a third of a point of rate. Below par it widens to 0.750 per 0.125, and a point buys closer to 17 basis points. The floor on the fixed is 6.50 percent.
That conversion is the whole post. Every adjustment on the grid is a price. Every price is a rung on the ladder. Every rung is a rate. When you know the ladder, you can read any adjustment in basis points, and you can see what actually moves your coupon.
Nothing on the sheet is indexed to fed funds
The fixed product has no index at all. It has a ladder, and the lender sets the ladder off where it can sell the paper. Where the paper sells reflects term rates and the credit spread investors demand for business-purpose rental loans. Policy expectations feed into term rates, so the committee is in there. But it is in there the way weather is in a crop yield. It shapes the field. It does not set the price of a bushel on Thursday.
I am not going to overclaim this. I will say it exactly as far as it goes. There is no line on the sheet that references the federal funds rate. There is no adjustment on the grid for it. The fixed-rate borrower's coupon is set the day the file locks, off the rung the file lands on, and it does not move again for thirty years.
What actually moves your coupon
Here is the payoff. These are the rate equivalents of the grid, at 75 percent leverage, converted off the September 11 ladder by walking the actual rungs rather than applying a flat multiplier. A large adjustment pushes a file into the steeper band above 7.500 percent, and a flat quarter-point-per-point rule understates it there. All figures are approximate, and all of them are measured against the strongest tier on the sheet.
Credit. Against a borrower at 740 and above, the 720 to 739 band pays about 6 basis points more. The 700 to 719 band pays about 19 more. The 680 to 699 band pays about 50 more. The 660 to 679 band pays about 69 more. The 640 to 659 band pays about 106 more. Credit also moves eligibility, not just price: the sheet does not offer 80 percent leverage below 680, and does not offer 75 percent below 640. That is a leverage constraint, not a rate adjustment, and it means the lower bands are not just paying more, they are borrowing less.
Coverage. Against a ratio of 1.25 or better, a file at 1.00 to 1.24 pays about 9 basis points more. A file at 0.75 to 0.99 pays about 66 more. A no-ratio file pays about 116 more. I walked the tiers themselves in DSCR Ratio Explained. The 116 is the largest single number on this list, and it is the one you control most directly, because coverage is rent divided by payment and the payment is a function of the loan size you choose.
Leverage. For a borrower at 740 and above, going from 50 percent to 75 percent leverage costs about 31 basis points. Going from 75 to 80 costs about 19 more. Fifty to 80 is about 50 basis points all in.
Prepayment term. Against a 60-month penalty, shortening to 24 months costs about 19 basis points. Taking no penalty at all costs about 50. The standard structure on this sheet is a five percent penalty on amounts paid above the scheduled payment, with terms of five, four, three, two and one years and six months, plus step-down variants. The prepayment penalty post works the whole menu.
The rest. Cash-out against purchase, about 50 basis points. A loan under $150,000, about 50. Short-term rental against long-term, about 25. Two to four units against a single family, about 13. A New Jersey LLC closing with a prepayment penalty carries its own adjustment on this sheet, about 9.
Now set those against the number everyone is watching. The federal funds target moves in increments of 25 basis points. Even if a quarter-point move passed through to a thirty-year DSCR coupon in full, which it does not, it would be smaller than the credit step from 700 to 680, smaller than the leverage step from 50 to 75, smaller than the cost of dropping the prepayment penalty, and less than a quarter of the no-ratio adjustment. The point lands on its own.
What it looks like on one Newton file
I own rental property in Newton, so I will trace a Newton deal, the same single-family I used in the lease-versus-market-rent post: a $340,000 purchase, a signed lease at $2,650 a month, and the same tax derivation. Everything below comes from that purchase price.
The reference file on the September 11 sheet: purchase, single-family, New Jersey, closing in an LLC, 75 percent leverage, a borrower at 740 and above, coverage in the 1.00 to 1.24 band, a loan between $150,000 and $1,000,000, five-year prepayment penalty. The adjustments net to negative 0.625 in price. Carry that to the ladder and the file lands at 6.875 percent for a net price of 100.375, or at 6.750 percent with the borrower paying about an eighth of a point.
At 75 percent the loan is $255,000. At 6.875 percent on a thirty-year fixed, principal and interest run $1,675.17 a month.
Taxes the New Jersey way, because the town does not reassess to your purchase price when you buy. Newton's average ratio is 89.64 percent, from the New Jersey Division of Taxation's Chapter 123 table applicable to 2026 appeals, and the rate is the 2025 certified general rate of 2.662 percent, the most recent published by the Sussex County Board of Taxation as of September 2026. So the assessed value is $340,000 times 89.64 percent, which is $304,776, and the annual tax is $304,776 times 2.662 percent, which is $676.09 a month. Insurance is $200.00 a month, and that one is an estimate, not a quote. Price your own before you rely on it.
Total payment: $1,675.17 plus $676.09 plus $200.00, which is $2,551.26. Coverage: $2,650 divided by $2,551.26, which is 1.04. That sits inside the 1.00 to 1.24 band the reference file assumed, so the 6.875 percent anchor holds. I am dividing gross rent by the full payment, the standard convention, the same one the lease-versus-rent post uses.
Now move one rung. At 6.750 percent the same loan runs $1,653.93 a month, which is $21.24 less. The rung costs about an eighth of a point, $318.75 on this loan, and pays for itself in about fifteen months. That is a real decision on a real sheet, and it is yours to make.
Now the hypothetical, labeled as one. Suppose a quarter-point policy move on Wednesday passed straight through to the ladder and moved this file from 6.875 to 6.625 percent, which is not how transmission works. Principal and interest would fall to $1,632.79, which is $42.38 a month, or $508.51 a year. Coverage would move from 1.04 to 1.06 and stay in the same band. Against that, the step from 740 and above down to the 660 to 679 band is worth about 69 basis points on this same file, nearly three times the size of the hypothetical, and coverage at 1.25 instead of 1.04 is worth about 9 basis points that you could reach with a larger down payment on the same building.
| 6.875% (reference) | 6.750% (one rung) | 6.625% (hypothetical 25 bp) | |
|---|---|---|---|
| Loan | $255,000 | $255,000 | $255,000 |
| Principal and interest | $1,675.17 | $1,653.93 | $1,632.79 |
| Taxes | $676.09 | $676.09 | $676.09 |
| Insurance | $200.00 | $200.00 | $200.00 |
| Total payment | $2,551.26 | $2,530.02 | $2,508.89 |
| Coverage | 1.04 | 1.05 | 1.06 |
| Monthly change from reference | $21.24 | $42.38 |
One more conversion, because it makes the scale plain. In the par band on this sheet, a quarter point of rate is one point of price. On a $255,000 loan, one point is $2,550. That is what the entire hypothetical Fed move is worth on this file, priced the way the lender prices it. The no-ratio adjustment on the same file is more than four points.
The honest counter-case
Two things, and they belong here, not in a footnote.
First, the Fed is not irrelevant. Policy expectations shape the whole curve, and the ladder is set off the curve. A genuine surprise on Wednesday, in either direction, will move where the lender sets the ladder tomorrow. The claim in this post is that transmission is indirect and partial. It is not that transmission is zero. If you lock on Friday, the sheet you lock on will carry whatever the curve did on Wednesday.
Second, and this one is on the sheet. The adjustable product on this same sheet resets off 30-day Average SOFR plus a 4.50 percent margin, with caps of 5/1/5 on the 7- and 10-year and 2/1/5 on the 5-year, and a floor of 6.50 percent. SOFR tracks the policy rate closely. So the investor who takes the ARM has handed the committee control of the payment at reset, and the investor who takes the fixed has not, even though the two priced identically at origination. The fixed and the ARM sit on the same ladder, rung for rung. There is no ARM discount on this sheet. I covered the margin, the caps, and what a reset does to coverage in the ARM post, and I am not going to rebuild it here. The short version: if you are the investor watching the Fed, the ARM is the product where your attention is warranted, and it is the product that gives you nothing for it on day one.
What to do this week
Price the deal at today's sheet. Not at the sheet you hope for on Thursday. Today's.
Then find the rung you can actually move. Coverage, through the loan size. Leverage, through the down payment. Prepayment term, through an honest answer about your exit. Credit, through the months before you apply. Each of those is a lever on the grid, and each is worth more to your coupon than the committee is.
Then stop underwriting a meeting. The DSCR loan guide has the full qualification path, the DSCR loans page has the program, and the calculators will run your own numbers against any rung you want to test. I wrote in July about why the fixed-rate mortgage is the inflation hedge, and this is the same argument from the other side: the rate you lock is the rate you keep, and the things that set it are on the sheet, not in Washington.
FAQ
Does the federal funds rate affect DSCR loan rates? Indirectly and partially. Fed funds is an overnight rate between banks. A 30-year fixed DSCR loan is priced off a lender's rate-and-price ladder, which reflects where the paper sells, and that in turn reflects term rates and credit spreads. Policy expectations shape the whole curve, so a genuine surprise from the committee moves where the ladder is set. But the pass-through is not one for one, and nothing on the sheet is indexed to the policy rate. On a wholesale business-purpose DSCR sheet dated September 11, 2026, the adjustments for credit, coverage, leverage and prepayment term are each worth more to your coupon than a quarter-point policy move would be even if it passed through in full.
What index do DSCR loans price off? A 30-year fixed DSCR loan has no index. It has a ladder of rates against prices that the lender sets off where it can sell the loan, plus a grid of adjustments that move the price. The adjustable version on the same sheet does have an index: 30-day Average SOFR, plus a 4.50 percent margin, with caps of 5/1/5 on the 7- and 10-year products and 2/1/5 on the 5-year. The fixed and the ARM price off an identical ladder at origination on that sheet. The difference shows up at reset, when the ARM follows the index and the fixed does not.
How much does credit score change a DSCR loan rate? On a wholesale business-purpose DSCR sheet dated September 11, 2026, at 75 percent leverage and converted off the sheet's own price ladder, a borrower in the 720 to 739 band pays about 6 basis points more than one at 740 and above. The 700 to 719 band pays about 19 more. The 680 to 699 band pays about 50 more. The 660 to 679 band pays about 69 more, and the 640 to 659 band about 106 more. Those are rate equivalents of price adjustments, and they are the difference between the rung you land on and the rung a stronger file lands on. Credit is the rung you can move before you apply.
Do DSCR ARMs follow the Fed differently than fixed-rate DSCR loans? Yes, and this is the honest counter-case to everything else in this post. On the September 11, 2026 sheet the 30-year fixed and the SOFR ARM price off an identical ladder, so on day one there is no difference and no ARM discount. At reset the ARM reprices to 30-day Average SOFR plus a 4.50 percent margin, and SOFR tracks the policy rate closely. So the investor in the ARM has handed the committee control of the payment at reset, and the investor in the fixed has not, even though the two priced the same at origination. If you are watching the Fed, the ARM is the product where it actually matters.
Send me the numbers, price, rent, down payment, credit band and the exit you actually expect, and I will price the file against the current sheet and show you which rung is yours to move. Send the numbers here.
Dominick Prevete — 31 years in real estate finance. Founder, National Loan Provider. 25 Main Street, Unit B, Sparta NJ. (908) 220-6404.
The rate-and-price ladder, the floor, the ARM index, margin and caps, the prepayment structure, and every rate equivalent in this post are taken from a single wholesale business-purpose DSCR rate sheet dated September 11, 2026, thirty-year fixed, one to four units. The lender is deliberately not named and the adjustment grid is not reproduced; rate equivalents are derived by stepping the sheet's own ladder from par, and every file prices to its own specifics on the day it is priced. The FOMC meeting dates, the decision time, and the current target range are from the Federal Reserve's published calendar and the July 29, 2026 statement. Newton's tax rate is the 2025 certified general rate; the equalization ratio is from the NJ Division of Taxation 2026 Chapter 123 table. Insurance is an estimate, not a quote. The quarter-point column is a labeled hypothetical for scale, not a forecast of Wednesday's decision or of how any decision would transmit. This is market commentary, not a commitment to lend.
Loans are for business purposes only and are not subject to TILA, RESPA, or HOEPA. Not for primary residences. Equal Housing Opportunity. All loans subject to underwriting approval. Rates and terms shown for illustration; actual rates depend on deal specifics. National Loan Provider does not arrange financing on owner-occupied residential properties. Every loan we arrange is business-purpose investor financing.