LAMD-D42 DSCR Closed-End Second | DSCR Guidelines

Loan limits

Lien position: Second lien (closed-end)
Minimum credit score: 680
Max LTV – purchase: N/A – stand-alone cash-out only
Max LTV – rate/term refinance: N/A
Max LTV – cash-out refinance: 80% CLTV (720, $50–350K); 75% (700); 70% (680)
Minimum loan amount: $50K
Maximum loan amount: $750K
Cash-out (cash in hand) limit: Per combined-lien caps: $2M → 90, $3M → 85, $3.5M → 80, $4M → 75, $5M → 60 CLTV
LTV reductions & overlays: Investment DSCR combined LTV: 75% at 700, 70% at 680 (to $350K). Combined lien balance caps: 90% to $2M, 85% to $3M, 80% to $3.5M, 75% to $4M, 60% to $5M. Declining market 70%. Warrantable condos and 2–4 units 75% on non-full-doc. Recent refinance within 6 months: 80%.

DSCR requirements

Minimum DSCR: 1.00
DSCR below 1.00: No
No-ratio (no DSCR calculated): No
How DSCR and qualifying rent are calculated: Minimum 1.00 at the note rate including first and second payments. Long-term rent = lower of lease or 1007 (lease required). STR accepted with 12 months of third-party rent documentation.

Products & terms

Products: 10/15/20/30yr fixed; 30/15 & 40/15 balloon ($200K min)
Interest-only: No (IO CES owner-occupied only)
Prepayment penalty: Minimum 1-year prepayment penalty required where allowed (terms 1–5 years; not offered in AK, DC, KS, MD, NM; limited in IL, MN, MS, NC, NJ, OH, PA, RI, TX, VA, WA, WI).
Reserves: None required on stand-alone CES

Borrower & credit

Housing payment history: 0x30x12 on all mortgages for all borrowers with a 12-month history.
Credit events (BK, foreclosure, short sale, modification): 48 months for foreclosure, short sale, deed-in-lieu or bankruptcy; no multiple events in 7 years.
Forbearance, deferrals & modifications: First lien can't be in active forbearance or deferment; a deferred balance from a modification over 12 months old may remain. Prior forbearance with all payments made: reinstated, no waiting period. Missed payments: reinstated plus 3 on-time payments after forbearance. Borrower explains the hardship.
Collections, charge-offs, judgments & liens: Open charge-offs/collections and medical collections under $1,000 each are OK; no delinquent accounts at closing.
Tradelines & credit depth: 3 tradelines reporting 12+ months or 2 reporting 24+ months, all with activity in the last 12 months (3 credit scores satisfies it). Limited or non-traditional credit not eligible.
First-time homebuyer: No
First-time investor: Not eligible; non-permanent residents and foreign nationals not eligible for DSCR seconds.
Foreign national: No
ITIN borrower: No
Non-permanent resident: No
LLC / entity vesting: LLC, partnership or corporation vesting allowed on business-purpose investment loans. Max 4 individual members/partners/shareholders (no entities or trusts as members); everyone with over 25% ownership must apply and meet credit; LLC can be the applicant with a personal guaranty, partnerships/corporations vest only.
Gift funds & assets: N/A
Financed property / exposure limits: No limit on financed investment properties; lender exposure $7.5M or 10 properties per borrower; condo project exposure the lesser of $5M or 15%.
Other borrower rules: US citizens and permanent residents only, with a valid SSN. Qualifying score is the lowest middle score of all borrowers. Must be an experienced investor (owned and managed investment property 12 months within the last 36). Non-occupant co-borrowers, first-time investors, first-time homebuyers, non-permanent residents and foreign nationals are ineligible.

Property

Eligible property types: SFR (max 10 acres), PUD, warrantable condo (75%), 2-4 (75%)
ADUs & unpermitted additions: Follows first-lien ADU rules (permits not required if zoning compliance is legal; comps with ADUs).
Non-warrantable condo: Not eligible – warrantable condos only (max 75% CLTV).
Condotel: Not eligible (SFR, PUD, warrantable condo, 2–4 units).
Rural / acreage: Rural only for primary residences; SFR max 10 acres.
Minimum square footage: 600 sq ft for single-unit properties (including condos); 2–4 units no minimum (size supported by market comparables)
Mixed use: No
5+ units / multi-property: No
Ineligible properties: Agricultural zoning (case-by-case), co-ops, Hawaii lava zones 1–2, hobby farms/income-producing acreage, houseboats, manufactured/mobile homes, multiple dwellings on one lot (legal ADUs OK), oil/gas leases (case-by-case), unique properties, working farms/ranches/orchards, room-and-board, assisted living. Also ineligible here: non-warrantable condos, condotels, rural investment properties and anything over 10 acres. Single-unit minimum 600 sq ft; year-round use with permanent heat; deferred maintenance under $2,000; appraisal condition C5/C6 or quality Q6 ineligible.
Declining markets: Maximum 70% CLTV for investment properties in declining markets.
Appraisal, review & insurance: Up to $400K: AVM (90% confidence) plus property condition inspection; full appraisal over $400K, for 2–4 units, or if AVM confidence is lower.

Rental income

Rent used on a purchase: N/A
Rent used on a refinance: Lower of lease or 1007; lease required
Vacant / unleased refinance: No – lease required for LTR
Short-term rental (Airbnb/VRBO): Yes
Short-term rental documentation: 12 months third-party rent documentation
Short-term rental limits: Short-term rental income is accepted with 12 months of third-party rent documentation. Plan on a 5% CLTV reduction and a 20% cut to gross STR rents, in an established STR market where local rules allow short-term rental – ask us to confirm for your scenario.

Refinance seasoning

Cash-out seasoning: More than 6 months of ownership required (DSCR is not a small full-doc loan).
Delayed financing (cash purchase recoup): N/A
Recently listed for sale: Properties listed for sale in the last 6 months are not eligible (120 days for small full-doc loans).

Other terms

Seller / interested-party concessions: N/A – stand-alone cash-out only.
Secondary financing: Stand-alone closed-end second (cash-out only for DSCR). First lien can't be in active forbearance/deferment, negatively amortizing, a reverse mortgage, or have a balloon due during the second's term. First-lien ARMs with under 3 years fixed remaining qualify at fully indexed. IO firsts qualify on the amortized payment.
State & local restrictions: All states, except loans failing the NY subprime test. Prepayment penalty (required on DSCR seconds where allowed) is not available in AK, DC, KS, MD or NM, or in IL over 8% APR, NJ over 6% rate, WA/WI on ARMs; other state limits apply.

Additional details

Notes: DSCR CES grid (CLTV): $50–350K 720 80 / 700 75 / 680 70; $350–500K 75/70/65; $500–750K 70/65/55. Declining market NOO max 70%. Listed for sale in last 6 mo ineligible. No forbearance, neg-am, reverse or early-balloon 1sts. Qualifies on lowest middle score of all borrowers.

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