LAMD-D12 DSCR Standard (Two Credit Tiers) | DSCR Guidelines

Loan limits

Lien position: First lien
Minimum credit score: Tier A 680 (680–699: max 70% purchase/rate-term, no cash-out, loan up to $1.5M, DSCR 1.00+; 700+ needed for interest-only and first-time investors; 720 for DSCR 0.80–0.99) / Tier B 640 (640–659: DSCR 1.25+, loan up to $1M, 70% 1-unit / 65% 2–4 units purchase/rate-term, no cash-out). Ask us to confirm 680–699 eligibility before quoting.
Max LTV – purchase: 80% with DSCR 1.00+. Tier A: 700+ FICO, loan up to $1.5M. Tier B: 720+ FICO with loan up to $1.5M, or 680–719 FICO with loan up to $1M.
Max LTV – rate/term refinance: 80%
Max LTV – cash-out refinance: 75%
Minimum loan amount: Tier A $100K (≤75 LTV) / $150K (>75); Tier B $125K / $200K
Maximum loan amount: Tier A $3.0M / Tier B $2.5M (DSCR>1.25, 740)
Cash-out (cash in hand) limit: Tier A: unlimited at 65% LTV or less; capped at $1M above 65%. Tier B: unlimited at 60% LTV or less; capped at $500K above 60%. Cash-out must be for business purposes (letter of explanation required).
LTV reductions & overlays: Tier A: a 1x30x12 housing late or a credit event 36–48 months old caps LTV at 75%; 680–699 FICO caps at 70% purchase/rate-term with no cash-out; non-warrantable condo 75%; condotel 75% purchase / 65% refi; declining market −5% when LTV is over 65%. Tier B: warrantable condo 75%; non-warrantable condo/condotel 75% purchase/rate-term, 70% cash-out; rural 75%; declining market −5%. Both tiers: recently listed cash-out (off-market less than 6 months) −5%; cash-out within 12 months of a prior cash-out (allowed at 6 months with documented improvements) −5%.

DSCR requirements

Minimum DSCR: Tier A 0.80 / Tier B 0.75
DSCR below 1.00: Yes – Tier A 0.80–0.99 with 720+ FICO, loan up to $1.5M, 75% purchase/rate-term, 70% cash-out. Tier B 0.75–0.99 with 660+ FICO, loan up to $2M, up to 75% purchase/rate-term and 70% cash-out. Not available with interest-only, first-time investors, gift funds, short-term rental income or (Tier A) condotels.
No-ratio (no DSCR calculated): No
How DSCR and qualifying rent are calculated: Gross rent ÷ PITIA (principal, interest, taxes, insurance, HOA). Interest-only loans qualify on the interest-only payment (ITIA) at the note rate. Landlord hazard policy required.

Products & terms

Products: Tier A: 30yr fixed, 30/40yr IO. Tier B: 15/30 fixed, 5/6 & 7/6 SOFR ARM, IO
Interest-only: Yes – Tier A: 30- or 40-year fixed IO, min 700 FICO and DSCR 1.00+. Tier B: 30-year fixed IO and 5/6 & 7/6 SOFR IO ARMs, DSCR 1.00+. 10-year interest-only period.
Prepayment penalty: Up to 5 years or the state maximum, whichever is lower. Not allowed in AK, IL, KS, MI, MN, NM, OH or RI; North Dakota not allowed on Tier A. New Jersey: allowed only when vesting in a corporation (C-corp/S-corp) or, on Tier B, an LLC; Tier A loans vested in an LLC can't carry a prepay in NJ. Some loans: not allowed in AK or NM; on Tier A also not allowed in IL, KS, MI, MN, ND, OH or RI.
Reserves: Tier A: 3 months under $1M, 6 months $1M–$1.5M, 9 months above $1.5M. Tier B: 3 months for $125K–$500K at 70% LTV or less, otherwise 6 months. Cash-out proceeds can count as reserves.

Borrower & credit

Housing payment history: Tier A allows 1x30x12 (max 75% LTV); Tier B requires 0x30x12. Applies to the subject and the primary residence; on Tier A any other mortgage on the credit report must be no worse than 1x30x12, on Tier B all other mortgages must be current. Renters must show an active lease; rent-free borrowers need a 12-month ownership/landlord history on another property and management review (rent-free not allowed for first-time investors).
Credit events (BK, foreclosure, short sale, modification): Bankruptcy (Ch 7/11/13), foreclosure, short sale, deed-in-lieu, mortgage charge-off, pre-foreclosure, notice of default, a 120-day mortgage late, a default modification or a non-COVID forbearance all count. Tier A: 48+ months no restriction; 36–48 months capped at 75% LTV. Tier B: 36 months. Measured from discharge/completion to the note date. Letter of explanation required for all derogatory credit.
Forbearance, deferrals & modifications: A non-COVID/non-disaster forbearance, a notice of default, a 120-day mortgage late or a modification due to default all count as a credit event and must meet the credit-event seasoning. COVID or non-default modifications are not treated as credit events.
Collections, charge-offs, judgments & liens: Collections and non-mortgage charge-offs under $5,000 may stay open if they won't cloud title; larger ones can stay open with reserves covering the balance. Collections past the state statute of limitations (documented) or on a payment plan don't need to be paid. Anything that can become a lien (judgments, tax liens, mechanic's liens, past-due property taxes) must be paid at or before closing, though an IRS/state tax-lien payment plan can stay open with the repayment agreement, 3 months of on-time payments, title-company confirmation of no impact on first-lien position, the lien balance counted in CLTV, and (on refinances) a subordination agreement from the taxing authority. Other past-due accounts must be brought current by closing. Medical collections are ignored.
Tradelines & credit depth: Each borrower needs at least two credit scores. If every borrower has 3 scores: 1 currently reporting tradeline that isn't an authorized-user account. If any borrower has fewer than 3 scores: 3 tradelines reporting 12+ months, or 2 reporting 24+ months, or 1 reporting 36+ months (open or closed, with activity in the last 12 months). A third-party VOM/VOR can count as a tradeline; a private VOM/VOR needs cancelled checks or bank statements. Authorized-user, collection, charge-off, foreclosure, deferred, bankruptcy-discharged, Chapter 13 trustee-paid and non-traditional accounts don't count. Non-permanent residents need a 2-year credit history. Non-traditional credit reports not allowed.
First-time homebuyer: No
First-time investor: Allowed on purchase and refinance with min 700 FICO (both tiers), DSCR 1.00+ and 0x30x12 (or free-and-clear) history; must currently own a primary or second home in the US, or have sold one within the last 3 months with a clean (0x30x12 or free-and-clear) mortgage history and be renting. Rent-free borrowers not allowed. Refinances allowed when the property was bought within the last year or vacant for renovations. Tier A doesn't allow STR income; Tier B does. First-time homebuyers (no ownership in the last 3 years) are ineligible. A first-time investor has not owned and managed a rental for 12 months in the last 3 years.
Foreign national: No
ITIN borrower: No
Non-permanent resident: Yes
LLC / entity vesting: LLC or corporation (no partnerships), up to 4 owners, all natural persons, no layered entities, US-domiciled, unanimous consent, ownership unchanged in the 90 days before application, no power of attorney. Revocable trusts per Fannie Mae.
Gift funds & assets: Purchase only, with a 10% borrower contribution and DSCR of at least 1.00. Not for reserves; gifts of equity not allowed. Large deposits don't need to be sourced.
Financed property / exposure limits: Up to 20 financed properties per borrower (properties in a business name and not on the credit report don't count). Lender exposure capped at $7.5M or 10 loans per borrower. No more than 5 properties (including the subject) acquired and financed in the 12 months before application; vacant land doesn't count.
Other borrower rules: Borrower must have a primary residence (proof of occupancy required). If owned, it must be superior to the subject, or not superior only because the subject is in a resort area or is 2–4 units, or owned 3+ years; otherwise extra occupancy review. No power of attorney on entity or cash-out loans. Family-member tenants not allowed. Non-permanent residents eligible; ITIN and foreign nationals not on this program.

Property

Eligible property types: SFR, 2-4, PUD, townhome, modular, warrantable & non-warrantable condo, condotel, rural (up to 20 acres)
ADUs & unpermitted additions: Permitted ADUs: long-term rent from the ADU can be added to the main dwelling's rent. Unpermitted ADUs/additions are acceptable on the property only if they meet Fannie Mae's rules (appraiser shows they're typical for the market, doesn't give them full value, and they're safe); no rent from an unpermitted unit counts. Manufactured/mobile homes are never acceptable as an ADU.
Non-warrantable condo: Allowed (full condo questionnaire). Non-warrantable features accepted: one entity owning up to 30% of units (21+ unit projects) or 4 units (5–20 units), commercial space up to 50%, presales down to 30%, HOA delinquencies up to 20% (60+ days), reserve allocation below 10% if no major repairs are indicated and the reserve balance is at least 30% (7–9.99%), 50% (5–6.99%) or 75% (3–4.99%) of the annual budget, insurance deductibles up to 10%, mandatory outside memberships with 2 similar sales comps. Non-structural litigation, commercial-insurance exceptions and builder concessions over 1% may be approved case-by-case. Ineligible: condo conversions under 2 years old, live-work units, mandatory rental pools, projects that restrict owner occupancy, timeshare/segmented or lockout units (Hawaii allows up to 20% timeshare units), manufactured-home projects, SEC-regulated projects, private transfer fees, common-interest apartments without an HOA, continuing-care communities, multi-unit condos on one deed/mortgage, projects with excessive seller/originator contributions affecting value. Max LTV: Tier A 75%; Tier B 75% purchase/rate-term, 70% cash-out.
Condotel: Allowed. Unit 500+ sq ft with a full kitchen (stove/oven), resort or metro area, no mandatory rental pool, no black-out dates, borrower must have exclusive use, no fractional ownership, borrower may own up to 20% of the project, 100% investor concentration OK in established projects, commercial space up to 50%. Tier A: 75% purchase / 65% refi, loan $150K–$1M, DSCR 1.00+. Tier B: 75% purchase/rate-term, 70% cash-out.
Rural / acreage: Rural allowed up to 20 acres (Tier B capped at 75% LTV). Primary use must be residential, no agricultural or income-producing use, interior photos of outbuildings, lot size typical for the area. Over 10 acres needs comparables with similar acreage. Agriculturally zoned is OK when the use is residential; Texas properties can't have mineral/drilling-rights exceptions.
Minimum square footage: 500 sq ft minimum for the property, and 500 sq ft minimum for each unit on 2–4 unit properties (condotel units also 500 sq ft minimum). Each unit needs a separate bedroom and a full kitchen with stove/oven.
Mixed use: Not eligible on the DSCR grid.
5+ units / multi-property: No
Ineligible properties: Manufactured/mobile homes (including manufactured ADUs), co-ops, domes/geodesic and other unique homes, log and log-façade homes, houseboats, vacant land, agricultural-type or land-development properties, community land trusts, 5+ units, blanket (multi-property) mortgages, boarding houses/PadSplit, B&Bs, timeshares/fractional, assisted living/continuing care, working farms/ranches/orchards, C5/C6 condition, tribal-trust land/Indian reservations, Hawaii lava zones 1–2, Puerto Rico/Guam/USVI, homes or units under 500 sq ft, any unit lacking a separate bedroom and a full kitchen with stove/oven (cooktop-only fails), properties not suitable for year-round occupancy, STR-qualified properties where local code bans short-term rentals, and mixed-use properties.
Declining markets: Declining market (per appraisal) reduces max LTV by 5%; on Tier A only when the LTV is over 65%.
Appraisal, review & insurance: Full interior/exterior appraisal with 1007 (1-unit) or 1025 (2–4 units); a new appraisal is required (no reuse from a prior origination). Appraisal must be under 180 days old at note (update after 120). One appraisal up to $2M; two above $2M (lower value used). All appraisals go through Fannie Mae's SSR. With one appraisal: score over 2.5 or no score requires a CDA and the collateral waterfall; over 3.5, or no score at LTV over 65%, also requires lender collateral review. With two appraisals: lender collateral review if the lower value's SSR is over 3.5. Transferred appraisals are allowed; they need lender collateral review when SSR is over 3.5 or no score is returned and LTV is over 65% (some loans: SSR over 3.5 and LTV over 70%).

Rental income

Rent used on a purchase: Lower of the lease or market rent (1007/1025). A new lease must start within 60 days of closing; an existing tenant's lease must be transferred.
Rent used on a refinance: Market rent from 1007/1025, or the lease if higher with 3 months' proof of receipt of the higher rent (security deposit doesn't count). Occupied properties need the executed lease; month-to-month needs the latest rent receipt unless market rent is higher than the lease. A newly signed lease must start within 60 days of the note with proof of the security deposit. Family-member tenants are not allowed.
Vacant / unleased refinance: Allowed – use market rent with a letter of explanation.
Short-term rental (Airbnb/VRBO): Yes
Short-term rental documentation: Purchase: appraiser's short-term rent analysis or the seller's 12-month platform history; if the appraiser can't provide one, an AirDNA/Opteon projection (12-month forecast, 50%+ occupancy, 5 comparable properties within the same ZIP or 5 miles, similar size/rooms/amenities; DSCR on projected revenue ÷ 12). Refinance: 12-month Airbnb/VRBO remittance average plus proof of an active listing; if not rented 12 months because recently bought or renovated, the appraiser/AirDNA projection may be used. Property must be in an area common for short-term rentals; appraiser must comment on STR prevalence; condos need a questionnaire confirming STR is allowed.
Short-term rental limits: Tier A: with remittance history DSCR 1.00 minimum; with a projection 1.25 at 75% LTV or less, 1.50 above 75%. Tier B: purchase 1.25 above 75% LTV, 1.00 otherwise; refinance 1.00. First-time investors: STR not allowed on Tier A.

Refinance seasoning

Cash-out seasoning: At least one borrower on title 6 months before the note date (except delayed financing); time held by the borrower's majority-owned entity or by a revocable trust where the borrower is primary beneficiary counts. Existing first mortgage being paid off must be at least 6 months old (note date to note date). If the prior loan was a cash-out refinance, it must be 12 months old, or 6 months if the appraisal shows recent improvements, with a 5% LTV reduction; a prior rate/term refinance doesn't trigger the 12-month rule. Cash-out letter must show proceeds are for business purposes. No power of attorney. Properties inherited within 6 months, land-contract payoffs and non-arm's-length deals are ineligible.
Delayed financing (cash purchase recoup): Yes (as R/T)
Recently listed for sale: Properties currently listed are not eligible to refinance. If listed in the prior 6 months: rate/term needs the listing off-market before application plus at least a 1-year prepayment penalty (where state law allows); cash-out needs either 6 months off-market, or off-market at least 1 day before application with a 5% LTV reduction plus a 1-year prepay. Cancelled listing, current MLS search and a letter of intent are required.

Other terms

Seller / interested-party concessions: Seller/interested-party contributions up to 6% of price at any LTV. Excess contributions and any personal property (furniture, cars, etc.) are deducted from the sales price before LTV is calculated.
Secondary financing: Not allowed – no new or existing subordinate financing can remain on a DSCR loan.
State & local restrictions: All 50 states; Puerto Rico, Guam and USVI ineligible. California properties must qualify with taxes of at least 1.25% of the purchase price unless the actual rate is documented higher. Prepayment penalties not allowed in AK, IL, KS, MI, MN, NM, OH, RI (and ND on Tier A); in NJ only with corporate vesting (or LLC on Tier B). Texas properties can't have mineral/drilling-rights exceptions.

Additional details

Notes: Declining market −5% when LTV >65 (Tier A). Manually underwritten.

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