Our manual underwriting process for DSCR loans provides the flexibility to evaluate loans comprehensively, allowing for more credit approval decisions.
LTV up to 85% on purchase loans and rate/term refinances, accommodating a wider range of borrowers and financial situations.
Investment Property Business Purpose Loan
This DSCR loan program is designed for real estate investors purchasing or refinancing investment property held for business purposes. Qualification is based primarily on the cash flow of the subject property rather than the borrower’s personal employment income. Guidelines are subject to change without notice.
And here’s the winning advantage: our free concierge service, FAST Lane, removes the uncertainty from Non-QM loans.
We understand that each investor’s situation is unique, and we’re dedicated to providing flexible solutions to meet your investment property needs. Details below:
Program Highlights
- Investment properties only
- Business purpose loan program
- Purchase, rate-and-term refinance, and cash-out refinance eligible
- Minimum loan amount: $100,000
- Minimum DSCR may be as low as 0.50 for eligible transactions
- Foreign National minimum DSCR: 1.00
- Short-term rental properties may be eligible
- No mortgage insurance required
- Temporary buydowns are not permitted
- IRS Form 4506-C is not required
- Tax transcripts are not required
Available Loan Terms
- 30-year fixed rate
- 30-year fixed rate interest-only
- 10-year interest-only period
- 20-year amortization period
- 40-year fixed rate interest-only
- 10-year interest-only period
- 30-year amortization period
- 5/6, 7/6, and 10/6 ARM options
- 5/6, 7/6, and 10/6 interest-only ARM options
Long-Term Rental DSCR Loan Matrix — DSCR 1.00 or Greater 22
Purchase and Rate-and-Term Refinance
- Up to $2,000,000 loan amount with a 740 minimum credit score: up to 70% LTV/CLTV
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 80% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 85% LTV/CLTV
- Up to $1,000,000 loan amount with a 660 minimum credit score: up to 75% LTV/CLTV
- Up to $1,000,000 loan amount for eligible Foreign National borrowers: up to 70% LTV/CLTV
Cash-Out Refinance
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 65% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 75% LTV/CLTV
- Up to $1,000,000 loan amount with a 700 minimum credit score: up to 70% LTV/CLTV
- Up to $1,000,000 loan amount with a 680 minimum credit score: up to 60% LTV/CLTV
Long-Term Rental Notes
- First-time investor minimum credit score: 680
- For condotel cash-out refinances, maximum LTV/CLTV is the lesser of 75% or the applicable matrix limit
Long-Term Rental DSCR Loan Matrix — DSCR 0.50 to 0.99 22
Purchase and Rate-and-Term Refinance
- Up to $2,000,000 loan amount with a 740 minimum credit score: up to 60% LTV/CLTV
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 70% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 75% LTV/CLTV
Cash-Out Refinance
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 55% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 65% LTV/CLTV
Short-Term Rental DSCR Loan Matrix — DSCR 1.00 or Greater
Purchase and Rate-and-Term Refinance
- Up to $2,000,000 loan amount with a 740 minimum credit score: up to 65% LTV/CLTV
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 75% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 80% LTV/CLTV
- Up to $1,000,000 loan amount with a 660 minimum credit score: up to 70% LTV/CLTV
Cash-Out Refinance
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 60% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 70% LTV/CLTV
- Up to $1,000,000 loan amount with a 700 minimum credit score: up to 65% LTV/CLTV
- Up to $1,000,000 loan amount with a 680 minimum credit score: up to 55% LTV/CLTV
Short-Term Rental Notes
- First-time investor minimum credit score: 680
Short-Term Rental DSCR Loan Matrix – DSCR 0.50 to 0.99
Purchase and Rate-and-Term Refinance
- Up to $2,000,000 loan amount with a 740 minimum credit score: up to 55% LTV/CLTV
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 65% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 70% LTV/CLTV
Cash-Out Refinance
- Up to $1,500,000 loan amount with a 720 minimum credit score: up to 50% LTV/CLTV
- Up to $1,000,000 loan amount with a 720 minimum credit score: up to 60% LTV/CLTV
DSCR Calculation Requirements
For fully amortized loan products, DSCR is calculated by dividing gross rents by the full subject property payment, including principal, interest, taxes, insurance, and association dues.
For interest-only loan products, DSCR is calculated by dividing gross rents by the interest-only payment, plus taxes, insurance, and association dues.
Minimum DSCR Requirements
- Purchase: minimum DSCR 0.50
- Rate-and-term refinance: minimum DSCR 0.50
- Cash-out refinance: minimum DSCR 0.50
- Foreign National borrowers: minimum DSCR 1.00
- Short-term rental with market score below 60: minimum DSCR 1.00
Eligible Financing Types
- Purchase mortgage
- Rate-and-term refinance
- Cash-out refinance
Maximum Cash-Out Guidelines
- Up to $1,000,000 cash out when LTV/CLTV is 50% or lower
- Up to $750,000 cash out when LTV/CLTV is greater than 50% and up to 60%
- Up to $500,000 cash out when LTV/CLTV is greater than 60%
- Cash-out proceeds must be used for a business purpose. Cash-out limits may be cumulative when multiple properties are financed at the same time.
Qualifying Rate
- Fixed rate loans qualify at the note rate
- ARM loans qualify at the greater of the fully indexed rate or the note rate
- Fixed interest-only loans qualify using the interest-only payment during the initial interest-only period
- Interest-only ARM loans qualify at the greater of the fully indexed rate or the note rate, based on the remaining loan term after the interest-only period expires
Borrower Eligibility
Eligible Borrowers
- U.S. citizens
- Permanent Resident Aliens
- Inter vivos revocable trusts
- Foreign Nationals
Ineligible Borrowers
- Non-Permanent Resident Aliens
- First-time homebuyers
- Non-arm’s-length transactions between family members
Investor Experience Requirements
An experienced investor is generally defined as at least one borrower with investment property
ownership and landlord experience managing residential or commercial real estate for at least 12 consecutive months within the most recent three years.
A first-time investor with less than 12 months of landlord experience may be eligible with a minimum 680 credit score.
Housing Payment History
- Required housing payment history: 0x30x12
- Applies to all liens, regardless of lien position
- Applies to all mortgages on all financed properties
Significant Credit Event Guidelines
Foreclosure
- 4 or more years from discharge or dismissal date may be eligible
- 2 to 4 years from discharge or dismissal may be eligible with:
- Lesser of 70% LTV or the applicable program guideline
- Greater of 660 credit score or the applicable program guideline
- Additional 3 months of reserves for the subject property
- Bankruptcy, Short Sale, Deed-in-Lieu, Pre-Foreclosure, Mortgage Charge-Off, Notice of Default, or
120-Day Delinquency
- 4 or more years from discharge or dismissal date may be eligible
- 2 to 4 years from discharge or dismissal may be eligible with:
- Lesser of 70% LTV or the applicable program guideline
- Greater of 660 credit score or the applicable program guideline
Eligible Property Types
- 1–4 unit properties
- Condos
- Warrantable and non-warrantable condos
- Condotels
- Leasehold estates
- Modular homes
- Planned Unit Developments
Ineligible Property Types
- Assisted living projects
- Bed and breakfast properties
- Boarding houses
- Builder model leaseback properties on purchase transactions
- Commercial-use properties
- Condos with deed restrictions
- Co-ops
- Indian or Tribal land
- Industrial properties
- Illegally zoned properties
- Land trusts
- Leasehold estate condo projects
- Manufactured home
- Mixed-use properties
- Mobile homes
- Properties adjacent to or containing environmental hazards
- Properties encumbered by private transfer fee covenants
- Properties located in a Coastal Barrier Resource System
- Properties not suitable for year-round occupancy
- Properties with C5 or C6 condition ratings
- Properties over 20 acres
- Properties with deed or resale restrictions
Unique properties, including log homes, berm homes, 3D-printed homes, barndominiums, tiny homes, and similar property types
Required Documentation
- Complete schedule of all real estate owned, including financed and free-and-clear properties
- Mortgage or lien rating for each financed property
- Business Purpose Loan Certification signed by the borrower
- Occupancy Certification signed by the borrower
Employment and Income Documentation
This DSCR loan program qualifies based on the cash flow of the subject property. Borrower employment and personal income are not required and should not be disclosed on the application.
Additional income sources are not eligible to be used for qualifying
Long-Term Rental Income Documentation
Purchase and Delayed Financing
If the subject property is tenant occupied at the time of the first payment due, the monthly rent is determined using the lesser of the market rent from the applicable rent schedule or appraisal report, or the current active lease agreement.
If the subject property is vacant at the time of the first payment due, the market rent from the applicable rent schedule or appraisal report is used to determine monthly rent.
Refinance
For refinance transactions, the most recent lease agreement and applicable rent schedule are required to determine monthly rent.
An expired lease that converts to month-to-month may be permitted with proof of the most recent month’s rental payment.
If the lease amount is within a 10% variance of the market rent schedule, the lease amount may be used. If the lease exceeds a 10% variance, the market rent shown on the rent schedule is used.
If there is no active lease agreement, 75% of the market rent shown on the applicable rent schedule may be used, with a letter of explanation supporting why the property is not currently rented.
Long-term rental income from an ADU may be used when the same requirements are met.
Short-Term Rental Income Documentation
Purchase and Delayed Financing
For short-term rental properties, an AirDNA Property Earning Potential report is required.
If the AirDNA market score is above 60, projected revenue is divided by 12 months to determine monthly rent. If the market score does not meet the requirement, the DSCR requirement is 1.00.
A comparable rent schedule is also required. If the comparable rent schedule is used as qualifying short-term rental income, appraiser commentary is required, including support for daily or weekly rates and the appropriate occupancy rate for the subject property market. When this method is used, the DSCR requirement is 1.00.
For condo short-term rentals, evidence must be provided confirming that short-term rentals are permitted.
Refinance
For short-term rental refinance transactions, an AirDNA Property Earning Potential report is required. If the market score does not meet the requirement, the DSCR requirement is 1.00.
A 12-month yearly income statement from a third-party rental platform, including month-to-month rental history, is required. The yearly income is divided by 12 months to determine monthly rent.
A comparable rent schedule is also required. If the comparable rent schedule is used for short-term rental income, appraiser commentary is required and the DSCR requirement is 1.00.
Qualifying monthly rent is generally based on the lesser of the applicable short-term rental income source and the 12-month income average, depending on the documentation used.
Reserve Requirements
- Loan amounts up to $1,000,000 require 6 months of reserves
- Loan amounts over $1,000,000 require 9 months of reserves
- Foreign National borrowers with loan amounts up to $1,000,000 require 12 months of reserves
- Maximum required reserves are the lesser of the total required amount or 15 months
- Cash proceeds from the transaction may be used for reserves
Appraisal Requirements
- Loan amounts at or below $1,500,000 require one appraisal
- Loan amounts above $1,500,000 require two appraisals
- A comparable rent schedule is required
- For one-appraisal transactions, one secondary valuation is required
If the secondary valuation is indeterminate or lower than the appraised value by more than the allowed tolerance, a second full appraisal may be required
Declining or Soft Market Requirement
If the appraiser indicates that the market is soft or declining, the maximum LTV must be reduced by 5%.
Escrow Waiver
Escrow waivers may be available up to a maximum 80% LTV.
Mortgage Insurance
Mortgage insurance is not required.
Subordinate Financing
Existing subordinate financing is permitted.
New subordinate financing is not permitted. Subordinate financing is also not permitted for condotels or when gift funds are used.
Properties Listed for Sale
Rate-and-Term Refinance
The subject property must not be currently listed for sale. If the property was listed for sale, it must be taken off the market before the note date.
Cash-Out Refinance
Properties listed for sale within the six months before the note date are limited to the lesser of 70% LTV/CLTV or the applicable program maximum. The property must be taken off the market before the note date.
Multiple Financed Properties
Borrowers may own an unlimited number of financed properties. All real estate owned and associated liens must be disclosed on the application.
A borrower may be limited to a maximum of 8 loans with the same company, not to exceed $3,000,000 in aggregate financing. New multiple loans must be underwritten simultaneously.
Prepayment Penalty Options
Prepayment penalty options may include no prepayment penalty or 1-year, 2-year, or 3-year prepayment penalty options, subject to state restrictions and compliance testing.
Important Guideline Notice
Loan program guidelines are subject to change without notice. Final eligibility, pricing, documentation, reserve requirements, and underwriting conditions depend on the complete borrower profile, property type, loan purpose, occupancy, credit profile, LTV, DSCR calculation, rental income documentation, and current investor guidelines.
Available in the Following States:
Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Oregon, South Carolina, Tennessee, Texas, Utah, and Washington.
Last Updated on 2 days ago by Broker Mortgages