LAMD-D06 DSCR Standard (Below 1.00 Allowed) | DSCR Guidelines

Loan limits

Lien position: First lien
Minimum credit score: 640 (DSCR ≥1) / 660 (DSCR <1)
Max LTV – purchase: 80% (700, ≤$1.5M)
Max LTV – rate/term refinance: 80%
Max LTV – cash-out refinance: 75% (700, ≤$1.5M)
Minimum loan amount: $100K (<$150K: 70% purch / 65% refi, DSCR 1.25)
Maximum loan amount: $3.5M
Cash-out (cash in hand) limit: $500K above 65% LTV; $1M below 65% (total equity withdrawn).
LTV reductions & overlays: 2–4 units and condos 75% purchase / 70% refi. Condotel 75% / 65%, max $1.5M. Rural 75% / 70%. 0x60x12 housing: 70% purchase / 65% refi. Credit event 24–35 months: 75% / 70%. Vacant or unleased refinance: 70%. Short-term rental: 75% purchase / 70% refi. Interest-only: 75% (70% cash-out), 680 FICO. Loans under $150K: 70% purchase / 65% refi with DSCR 1.25+. Declining market and CT/IL/NJ/NY: 75% / 70%, $2M max.

DSCR requirements

Minimum DSCR: No stated floor in <1.00 grid
DSCR below 1.00: Yes – DSCR below 1.00 (max LTV purchase / rate-term / cash-out): 700+ FICO: up to $1.5M 75/75/70; $2M 70/70/65; $2.5M 65% purchase only; $3M 60% purchase only. 680 FICO: up to $1.5M 70/70, no cash-out; $2M 65/65, no cash-out; $3M 60% purchase only. 660 FICO: max $1M, 65% purchase only.
No-ratio (no DSCR calculated): No – DSCR is always calculated from documented rents; DSCR below 1.00 is allowed with no stated minimum (see the below-1.00 grid).
How DSCR and qualifying rent are calculated: Monthly gross rent ÷ PITIA (or ITIA on IO), each unit evaluated separately. Long-term: lower of lease or market needs nothing more; a higher lease is usable with 2 months' receipts but capped at 120% of market; a higher market rent is usable but capped at 120% of the lease. Rent-controlled/subsidized units use contract rent. Short-term: 12-month average, reduced by at least 20% for expenses (actual expenses if higher), lowest source used when there are several.

Products & terms

Products: 15/30/40 fixed, 5/6 7/6 10/6 ARM (30 & 40yr; 40yr ARM must be IO)
Interest-only: Yes – 680 FICO; 75% purch/RT, 70% CO
Prepayment penalty: Up to 5 yr; not in AK, MI, NM, OH; IL & NJ only if entity-vested; MS declining only; PA base-figure limit
Reserves: 2 months; 6 months over $1.5M; 12 months over $2.5M. Cash-out counts; gift funds don't. Waived on rate/term refinances that cut the P&I payment by 10% or more with 1x30x12 or better housing history.

Borrower & credit

Housing payment history: 1x30x12 with no reduction; 0x60x12 allowed at 70% purchase / 65% refi. Verified on the primary residence and the subject (refi); other mortgages on credit count. Free-and-clear primary needs a property profile.
Credit events (BK, foreclosure, short sale, modification): Bankruptcy, foreclosure, deed-in-lieu, pre-foreclosure, short sale, mortgage charge-off, lis pendens and notice of default all count as credit events: 36+ months seasoning with no reduction; 24–35 months allowed at max 75% purchase / 70% refinance; under 24 months ineligible (first-time investors need 36 months). Bankruptcy measured from discharge/dismissal; housing events from settlement; a foreclosure included in a bankruptcy runs from the earlier date. A notice of default is treated the same as a foreclosure (the former exception for a default cured with 12 on-time payments no longer applies). A charged-off second mortgage counts as a foreclosure from its charge-off date.
Forbearance, deferrals & modifications: Forbearance, modification, deferral or repayment plans on any property the borrower owns are acceptable once completed, with all related obligations satisfied and at least 3 consecutive on-time payments made as of the application date of the new loan. No 12-month seasoning period applies.
Collections, charge-offs, judgments & liens: For DSCR loans, collections and charge-offs can be ignored unless they affect title. All open judgments and involuntary liens must be paid at or before closing (no subordination). IRS installment plans OK with 2+ on-time payments and no recorded lien in the subject's county. Credit counseling OK after 12 on-time months.
Tradelines & credit depth: 2 tradelines reporting 24 months (active in last 12) or 3 reporting 12 months; waived if the borrower has three credit scores. Representative score is from the borrower/guarantor with the highest score.
First-time homebuyer: Not eligible, except a first-time homebuyer living in a primary residence owned by their spouse (spouse on title; 12-month housing history or free-and-clear evidence). If that borrower is also a first-time investor, the first-time investor rules apply (700 FICO, 36 months since any credit event, DSCR 1.00+).
First-time investor: Allowed: 700 FICO, 36 months since any credit event, DSCR 1.00 or higher, must own a primary residence; any property type eligible on the program (no 1-unit limit). First-time homebuyers not allowed, except one living in a primary residence owned by their spouse (spouse on title, 12-month housing history or free-and-clear evidence).
Foreign national: No
ITIN borrower: No
Non-permanent resident: Yes
LLC / entity vesting: LLC, partnership or corporation formed primarily to own, finance, lease or manage real estate; US-domiciled; up to 4 members/managers; up to two entity layers allowed. Applications from members/managers representing at least 25% cumulative ownership – their credit is used for qualifying and pricing – and each must sign a full-recourse personal guaranty or be individually obligated on the Note; the guarantor must have authority to sign for the entity. Power of attorney not allowed on entity-vested loans.
Gift funds & assets: Allowed after a 10% borrower contribution; gifts can't be used for reserves. Non-borrowing spouse funds may be treated as the borrower's own funds without a gift letter.
Financed property / exposure limits: Lender exposure to one borrower/household: $5M UPB or 10 loans.
Other borrower rules: US citizens, permanent and non-permanent residents. Non-arm's-length transactions ineligible. Interest-only qualifies on the IO payment.

Property

Eligible property types: SFR, 2-4, condo, condotel, rural
ADUs & unpermitted additions: Total unit count (main dwelling plus ADUs) cannot exceed four. Each ADU must be smaller than the main house, built to a quality consistent with it, and have its own entrance, kitchen (cabinets, counter, sink with running water, stove), sleeping area and bathroom; space reachable only through, or open to, the main house isn't an ADU. The appraisal must describe the ADU and include at least one comparable with the same use and the same number of ADUs. An ADU that isn't allowed under zoning does NOT make the property ineligible if hazard insurance replacement cost covers it, the use conforms to the neighborhood, and the appraiser shows two comparable sales with the same non-compliant use – but its rent can't be counted. ADU rent counts only when the appraisal shows zoning is legal (permits verified where required); long-term ADU rent is the lower of market rent (1007/1025) or actual rent (lease copy required if transferred on a purchase); short-term ADU rent follows the STR documentation rules, with AirDNA bedroom count including the main dwelling and ADUs. Rents must be itemized when two ADUs generate income.
Non-warrantable condo: Condos are reviewed under program-specific project rules rather than a warrantable/non-warrantable split. Full review (condo questionnaire) required except site/detached condos, 2-4 unit projects, 5-10 unit projects not part of a larger development or master association, and projects with an unexpired Fannie Mae CPM approval. Unit 500+ sq ft with an operable kitchen and at least one bedroom; commercial space up to 50%; no more than 20% of units 60+ days delinquent on HOA dues. Single-entity ownership: 1-4 unit projects max 1 unit; 5-10 unit projects in a master association max 2; 11-20 units max 2; 21+ units max 20%. No investor-concentration limit. Litigation acceptable only for minor matters with no safety, structural, habitability or functional impact (e.g., non-monetary disputes, insurer-defended covered claims, HOA as plaintiff for minor or already-remediated issues, past-due assessments or foreclosure, localized damage to a non-subject unit). Established projects need 90% sold, 40% owner-occupied, all phases complete and HOA turned over; new projects 50% sold and 50% owner-occupied. Projects with critical repairs, unremediated special assessments for critical repairs, or safety/habitability violations are ineligible. Projects made up entirely of detached (site) units use single-family LTVs. Project exposure limit: lesser of $5M or 25% of units (projects over 4 units).
Condotel: Allowed: 75% purchase / 65% refi, max $1.5M; unit 500+ sq ft, full kitchen, separate bedroom; investor concentration up to 100%; rents reduced 10%. Owner self-managing as an STR doesn't by itself make it a condotel.
Rural / acreage: Rural allowed at 75% purchase / 70% refi; max 5 acres on this program. Rural = appraiser says rural, or unpaved road plus 2 of 3 comps over 5 miles away.
Minimum square footage: SFR 700; 2-4 400/unit; condo 500
Mixed use: No
5+ units / multi-property: No
Ineligible properties: Manufactured/mobile homes, co-ops, timeshares and fractional ownership, boarding houses/B&B/PadSplit, healthcare/assisted-living use, properties with income-producing non-residential structures (billboards, cell towers, commercial workshops), agricultural features (vineyards, farms, ranches, orchards, equestrian), zoning violations or illegal use, domes, barndominiums, log homes not common to the area, houseboats, Native American reservation land, marijuana-related use, properties not accessible by standard roads or not suitable for year-round use, C5/C6 condition or Q6 quality, Hawaii lava zones 1–2 and coastal-erosion zones (Hawaii coastal properties subject to lender review), vacant land/land development, and unique properties with no comparable sales in the market. Over 5 acres ineligible on this program (no truncating). Leaseholds eligible where common.
Declining markets: Declining market (per appraisal or lender-designated state): max 75% purchase / 70% refinance and $2M loan (FN: 70% refi, $2M; 5–8/mixed use: no adjustment).
Appraisal, review & insurance: Full interior/exterior appraisal plus review product (or second appraisal); second appraisal required over $2M and on HPML flips (price up 10% within 90 days or 20% within 91–180 days of the seller's purchase). Transferred appraisals accepted. Escrow holdbacks not purchased.

Rental income

Rent used on a purchase: Lower of lease or 1007; higher of either allowed within 120% (lease needs 2 mo receipt); vacant OK without LTV hit
Rent used on a refinance: Original appraisal showing tenant-occupied, 1007/1025 and the lease (month-to-month OK). No lease provided: max 70%. Lease/market 120% caps apply. Leases can't be with an interested party or family member.
Vacant / unleased refinance: Allowed at the lesser of 70% or the grid. Vacant purchases have no LTV restriction.
Short-term rental (Airbnb/VRBO): Yes
Short-term rental documentation: Must meet local ordinances. Any of: appraiser STR analysis (data source, comps, daily rate, occupancy, seasonality), 12-month property-manager statement (net of fees), 12 months of bank statements with rental records, or an AirDNA Rentalizer (purchase only, 12-month forecast within 90 days, 3 default comps, minus 20%).
Short-term rental limits: Lesser of 75% purchase / 70% refinance or the grid; 20% expense haircut; condotel rents reduced 10%.

Refinance seasoning

Cash-out seasoning: Six months of ownership to use the current appraised value; under 6 months, value is limited to price plus documented improvements (except inherited or divorce-awarded property). Not eligible if there was a cash-out within the past 6 months, for land-contract payoffs, with a POA, or if proceeds go to personal debts/taxes/judgments. Paying delinquent taxes (60+ days) or refinancing a free-and-clear property counts as cash-out. Rate/term refinances seasoned 6 months or less are also valued at the lesser of the appraisal or price plus documented improvements (same inheritance/divorce exceptions). Investment properties listed for sale in the past 6 months are eligible for cash-out only with a prepayment penalty of at least 3 years (so only where a penalty is permitted).
Delayed financing (cash purchase recoup): Allowed for cash purchases within 6 months, treated as rate/term for pricing (cash-in-hand caps don't apply, except foreign nationals). Arm's-length purchase, documented funds, no liens; loan limited to documented investment, value capped at price plus improvements.
Recently listed for sale: For all refinances, value is the lower of the lowest list price in the prior 12 months or appraisal. Cash-out on an investment property listed within the past 6 months is allowed only with at least a 3-year prepayment penalty; any active listing must be cancelled before closing.

Other terms

Seller / interested-party concessions: Investment property: interested-party contributions up to 6%, for closing costs and prepaids only (never down payment or reserves). A borrower acting as their own agent may contribute commission within the limit. Excess reduces both price and value.
Secondary financing: Allowed if subordinated and included in CLTV (HELOCs counted at the full line amount unless past the draw period); no secondary financing from an interested party on purchases. The program's max LTV/CLTV limits apply.
State & local restrictions: Not available in Baltimore City MD, Philadelphia County PA, Puerto Rico, Guam or USVI. 2–4 units not eligible in IL and NY. CT, IL, NJ, NY overlay: max 75% purchase / 70% refi and $2M (FN: 70% refi, $2M). Prepayment penalties not allowed in AK, MI, NM, OH; in IL and NJ only for entity borrowers; PA not on 1–2 units at or below about $329K; MS declining only. Texas: borrowers connected to China, Russia, Iran or North Korea are restricted – non-permanent residents from those countries cannot finance investment property, and foreign nationals domiciled there are ineligible.

Additional details

Notes: Not available Baltimore City, Philadelphia County, PR/Guam/USVI. IL & NY: 2-4 unit ineligible. CT/IL/NJ/NY and declining markets: max 75% purch / 70% refi, $2M. Non-arm's-length ineligible.

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