LAMD-D13 DSCR Recent Credit Event | DSCR Guidelines

Loan limits

Lien position: First lien
Minimum credit score: 640
Max LTV – purchase: 80% (DSCR≥1, ≤$1.5M, 680+); 70% at 640
Max LTV – rate/term refinance: 80%
Max LTV – cash-out refinance: 75% (DSCR≥1); 60% (DSCR<1)
Minimum loan amount: $125K (≤75 LTV) / $200K (>75)
Maximum loan amount: $2.5M (700+); $2.0M (≤680)
Cash-out (cash in hand) limit: Unlimited at 65% LTV or less; $500K cap above 65%. Cash-out must be for business purposes (letter of explanation required).
LTV reductions & overlays: Non-warrantable condo 80% purchase / 75% refi (−5% more in Florida), DSCR 1.00+. Rural 75%. Short-term rental 75% purchase / 70% refi, DSCR 1.00+. First-time investor 75% purchase / 70% refi. 2x30x12 housing caps at 65% and $1.5M. Credit event 24–35 months caps at 65%. DSCR below 1.00 caps at 70% purchase/rate-term and 60% cash-out (60% / 55% at $2.5M). Declining market −5%. 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: 0.75
DSCR below 1.00: Yes – 0.75–0.99: max 70% purchase/rate-term and 60% cash-out up to $2M (640+ FICO); at $2.5M (700+ FICO) 60% purchase/rate-term, 55% cash-out. Not available for non-warrantable condos, short-term rentals or first-time investors (DSCR 1.00 required).
No-ratio (no DSCR calculated): No
How DSCR and qualifying rent are calculated: Gross rent ÷ PITIA; interest-only loans use the IO payment (ITIA) at the note rate.

Products & terms

Products: 15/30 fixed, 5/6 & 7/6 SOFR ARM, IO
Interest-only: Yes – min 700 FICO
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. New Jersey: allowed only when vesting in a corporation (C-corp/S-corp) or an LLC. Some loans: not allowed in AK or NM.
Reserves: 3 months under $1M, 6 months $1M–$1.5M, 9 months above $1.5M. Cash-out proceeds may be used.

Borrower & credit

Housing payment history: 1x30x12 allowed with no restriction; 2x30x12 allowed at max 65% LTV and $1.5M; 0x60x12 required. Rolling 30-day lates count as one. Applies to subject and primary residence; other mortgages must be current. First-time investors 0x30x12.
Credit events (BK, foreclosure, short sale, modification): Built for recent credit events: 36+ months no restriction; 24–35 months allowed at max 65% LTV; under 24 months not allowed. Counts bankruptcy, foreclosure, short sale, DIL, charge-off, NOD, 120-day late, default modification, non-COVID forbearance. Seasoning is measured to the application date. First-time investors need 48 months. Layered events (credit event + housing late) need credit-risk approval.
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 (no property owned in 5 yrs)
First-time investor: Allowed at 75% purchase / 70% refi, DSCR 1.00+, 0x30x12, 48-month credit-event seasoning; must own a primary or second home (or prove a clean prior mortgage plus current rental). Recently acquired or renovated properties can be refinanced. STR allowed.
Foreign national: No
ITIN borrower: No
Non-permanent resident: Yes
LLC / entity vesting: LLC, corporation and Fannie-eligible revocable trusts (entity rules: up to 4 natural-person owners, no layered entities, no POA).
Gift funds & assets: Purchase only, with a 5% borrower contribution. Not for reserves; no gift of equity. Large deposits don't need sourcing.
Financed property / exposure limits: Up to 20 financed properties (properties in a business name and not on the credit report don't count); lender exposure $7.5M / 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: US citizens, permanent and non-permanent residents. Foreign nationals and first-time homebuyers ineligible. Borrower must have a documented primary residence: if owned, superior to the subject, or not superior only because the subject is in a resort area or is 2–4 units, or owned 1+ year; otherwise extra occupancy review. Renters need an active lease; rent-free borrowers need a 12-month ownership/landlord history and management review. No power of attorney on entity or cash-out loans. No family-member tenants.

Property

Eligible property types: SFR, 2-4, PUD, warrantable & non-warrantable condo, condotel, rural
ADUs & unpermitted additions: Permitted ADUs only. Both long-term and short-term ADU rent can count, but only if the ADU is rented the same way as the main house (e.g., both long-term). If the main house is long-term and the ADU is short-term, DSCR uses the main house only. Unpermitted additions must meet Fannie Mae rules to be acceptable and earn no rent credit. Manufactured homes can't be ADUs.
Non-warrantable condo: Allowed with full questionnaire (same feature allowances as the core tiers). 80% purchase / 75% refinance, reduced 5% in Florida, minimum DSCR 1.00.
Condotel: Allowed per non-warrantable condo rules: 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%. 80% purchase / 75% refinance (−5% in Florida), DSCR 1.00+.
Rural / acreage: Rural allowed, max 75% LTV, up to 20 acres; acreage and land value must be typical for the market.
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: No
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, mixed-use properties, and vacant properties on a refinance.
Declining markets: Declining market (per appraisal) reduces max LTV by 5%.
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 lease or 1007/1025
Rent used on a refinance: Market rent, or a higher lease with 3 months' receipts. Month-to-month needs the latest receipt. A new lease must start within 60 days with the deposit documented.
Vacant / unleased refinance: Not allowed – vacant properties can't be refinanced.
Short-term rental (Airbnb/VRBO): Yes
Short-term rental documentation: Purchase: appraiser STR analysis, 12-month platform history, or AirDNA/Opteon (12-month forecast, 50%+ occupancy, 5 comps in ZIP or 5 miles). Refinance: 12-month remittance average plus active listing; projection allowed if the property was recently bought or renovated.
Short-term rental limits: Max 75% purchase / 70% refi; minimum DSCR 1.00. First-time investors may use STR.

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; in NJ only with corporate or LLC vesting. Florida non-warrantable condos −5% LTV. Texas properties can't have mineral/drilling-rights exceptions.

Additional details

Notes: Credit-challenged DSCR tier. Manually underwritten.

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