Borrowers seeking to access property equity without disrupting their first mortgage may qualify for a DSCR Second Mortgage. This program allows investors to leverage their existing real estate holdings using the property’s Debt Service Coverage Ratio (DSCR) rather than traditional income documentation.
Eligibility Matrix / Max CLTV / Program Parameters
Loan Amount – Credit Score – Rate/Term – Cash-Out Limits
Refinance Rate Term
- 720 Credit Score 85% CLTV – $1,000,000
- 700 Credit Score 80% CLTV – $750,000
- 680 Credit Score 75% CLTV – $500,000
- 660 Credit Score 70% CLTV – $250,000
Refinance Cash Out
- 720 Credit Score 80% CLTV
- 700 Credit Score 75% CLTV
- 680 Credit Score 70% CLTV
- 660 Credit Score 65% CLTV
* Minimum Debt Service Coverage Ratio .75
* Maximum Loan Amount $1,000,000
Credit Criteria
Mortgage History: 0 30-day late previous 12 months
Credit Event Seasoning:
- Bankruptcy Seasoning: 36 months
- Foreclosure Seasoning: 36 months
- Short Sale Seasoning: 24 months
- Deed-in-Lieu Seasoning: 24 months
Available Terms:
- 15-Year Fixed
- 20-Year Fixed
- 25-Year Fixed
- 30-Year Fixed
- Interest Only Yes
Occupancy
Business-purpose investment properties only are eligible for financing under this DSCR Second Mortgage program. Primary residences and owner-occupied properties are not permitted.
Eligible Property Types
Eligible properties include Single Family Residences (SFRs), Planned Unit Developments (PUDs), townhomes, and 2–4 unit properties.
- Note: For 2–4 unit properties, a 5% CLTV reduction applies.
Ineligible Property Types
This program does not allow financing for the following:
Condos, non-warrantable condos, rural properties, condotels, commercial or agricultural properties, leasehold properties, land trusts, age-restricted communities, hobby farms, modular homes, land contracts, or log homes.
Required Reserves
No reserve funds are required to qualify for this DSCR Second Mortgage.
Short-Term Rentals
Short-term or vacation rentals are allowed xto 8o% CLTV.
Interest-Only Option
Interest-only payment structures are not permitted.
DSCR Calculation
The Debt Service Coverage Ratio (DSCR) is calculated as:
Gross Rents ÷ PITIA (Principal, Interest, Taxes, Insurance, and Association Dues) – using a fully amortizing payment.
- Minimum DSCR: 1.00x
Ownership Seasoning
A minimum of six (6) months of ownership is required before applying for this DSCR Second Mortgage.
Lease and Gross Income Requirements
Rental income is determined by the lesser of:
- The estimated market rent from Form 1007, or
- The existing lease amount.
Higher lease rents may be used with three months of documented receipt.
A current lease must be in place for all subject properties.
For 2+ unit properties, a maximum of one vacant unit is allowed.
Eligible Borrowers
Borrowers may include natural persons, corporations, or LLC entities.
- For LLCs, a domestic LLC is required.
- Guarantors may be U.S. citizens, permanent residents, or non-permanent resident aliens with established U.S. credit.
Eligible Citizenship
Eligible citizenship types include:
- U.S. Citizens
- Permanent Resident Aliens
- Non-Permanent Resident Aliens (with U.S. credit)
Personal Guaranty
A personal guaranty is required for all loans made to entity or LLC borrowers.
Appraisal Requirements
For loan amounts ≤ $500,000:
- AVM (Automated Valuation Model) + Property Condition Report, or
- Full interior appraisal (Fannie Mae Form 1004 or 1025).
For loan amounts > $500,000:
- Full interior appraisal required (Fannie Mae Form 1004 or 1025).
Other requirements:
- Appraisal waivers are not acceptable.
- Acceptable vendors include ClearCapital and Confidence.
AVM Requirements
- Acceptable vendor: ClearCapital
- Confidence Rating: ≥ 90% / ≤ 0.10 FSD score
- If these standards aren’t met, a Class iQuant, Exterior-Only, or Full Interior Appraisal is required.
Credit Requirements
Borrowers must demonstrate:
- 3 tradelines reporting for 12+ months, or
- 2 tradelines reporting for 24+ months, or
- 1 mortgage or installment tradeline for 36+ months, all with activity in the past 12 months.
No late payments (0x60) within the last 12 months.
The qualifying FICO is the higher middle score when three agency scores are available, or the lower middle when only two are provided, across all borrowers or guarantors.
Title Policy
- ≤ $400,000: Owner and Encumbrance Property Report
- > $400,000: Full Title Policy required
MLS Listed Properties
Properties listed for sale within six months prior to the loan application are ineligible.
Escrows and Insurance
Sufficient flood insurance coverage is required — defined as the lesser of the combined first and second lien UPB or $250,000. Documentation must verify adequate coverage.
Compliance
All loans must comply with applicable federal and state regulations.
Declining Markets
If the subject property is in a declining market, as indicated by the appraisal, the maximum CLTV is reduced by 5%.
Hazard Coverage
100% replacement cost coverage is required — or updated coverage sufficient to protect both the first and second liens.
Prepayment Penalty Options
Borrowers may select from several stepdown prepayment structures, including:
- 5-year: 5%, 4%, 3%, 2%, 1%
- 4-year: 5%, 4%, 3%, 2%
- 3-year: 5%, 4%, 3%
- 2-year: 3%, 3%
- 1-year: 3%
State-specific restrictions may apply.
Loan Program Summary
The DSCR Second Mortgage Loan Program is designed for experienced real estate investors seeking to maximize property equity through responsible leverage. With flexible borrower eligibility, no reserve requirement, and an asset-based qualification approach, this program offers a practical path for expanding investment portfolios while maintaining first-mortgage stability.
Available in the Following States
Alabama, Arkansas, California, Colorado, Connecticut, DC, Delaware, Florida, Georgia, Hawaii, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.