LAMD-D04 DSCR Standard 0.75+ | DSCR Guidelines

Loan limits

Lien position: First lien
Minimum credit score: 620 (highest middle score qualifies; no borrower below 620). No FICO-by-loan-size grid
Max LTV – purchase: 80% (STR 75%; FTHB 75%; suburban/rural-residential 80%)
Max LTV – rate/term refinance: 80% (STR 70%; suburban/rural-residential 75%)
Max LTV – cash-out refinance: 80% (listed for sale in 12 mo 70%; suburban/rural-residential 65%; inherited 60%; gift of equity 70%)
Minimum loan amount: $100K (DSCR ≥1); $175K (DSCR 0.75–0.99)
Maximum loan amount: $3.0M
Cash-out (cash in hand) limit: Unlimited.
LTV reductions & overlays: Condos 80%. First-time investor 80%. Interest-only and 40-year terms 80%. DSCR under 1.00 with 30-year IO: 70% (DSCR under 1.00 loans over 70% must be 30-year fixed). No prepay 80%. First-time homebuyer 75%. Suburban-appraised but rural-residential zoned: 80% / 75% / 65%. STR 75% purchase / 70% refi. Recently inherited 60%. Gift of equity 70%. Listed for sale within 12 months (cash-out) 70%. Declining market −5%.

DSCR requirements

Minimum DSCR: 0.75
DSCR below 1.00: Yes – 0.75–0.99: min $175K, no 40-yr; >70% LTV 30yr fixed only; DSCR<1 IO max 70%
No-ratio (no DSCR calculated): No
How DSCR and qualifying rent are calculated: Lower of appraisal market rent or lease ÷ PITIA (IO uses ITIA). Minimum DSCR 0.75 (loan $175K+, no 40-year). Refinance: a lease above market can be used up to 120% of market with the latest 3 months' receipts; if the lease is below market with under 6 months left, market up to 120% of the lease. Purchase: vacant uses 100% of market. 2–4 units calculated unit by unit. Expired leases treated as renewed with 1 month's receipt. Family-member tenants and leases allowing STR subletting not eligible.

Products & terms

Products: 5/6 & 7/6 ARM (30/40 amort, IO), 30/40 fixed, IO
Interest-only: Yes – 30/40yr with 10-yr IO, max 80% (DSCR<1: 30yr IO 70%)
Prepayment penalty: 1–5 yr standard, 3–5 yr 5% flat, or 5-yr declining; no-PPP max 80%
Reserves: DSCR 1.00+: none under $1.5M at 70% LTV or less; 6 months under $1.5M above 70%; 9 months over $1.5M. DSCR under 1.00: 6 months under $1.5M, 9 over; cash-out 6 months. Cash-out can count; based on the greatest payment if multiple loans.

Borrower & credit

Housing payment history: 1x30x12 (no rolling lates); 0x30x12 if a credit event is under 4 years old. Only one borrower needs to meet it; all must be current at application. Primary and subject verified; other REO only if on credit. No mortgage on credit requires pre-approval unless free-and-clear with taxes current, a prior 12-month history, a private VOM with 12 months of bank records, or rent-free with a spouse. Borrowers temporarily rent-free after selling a home are fine with the prior 12 months documented.
Credit events (BK, foreclosure, short sale, modification): Foreclosure, short sale, deed-in-lieu, default modification, notice of default, a single bankruptcy, or 120+ day late (any occupancy, even title-only properties). Seasoned from discharge/completion to note date. Events under 4 years old require 0x30x12 and an explanation. Multiple events within 4 years not permitted; multiple bankruptcies ever are ineligible. Foreclosures included in a bankruptcy use the BK discharge date if vacated. Delinquent timeshares are treated as installment debt.
Forbearance, deferrals & modifications: A natural-disaster or non-financial-hardship forbearance/deferral on the primary or subject must be completed with 2 payments made since (purchase or rate/term) or 6 payments (cash-out); the deferred balance can be paid off by the refinance. A primary residence currently in forbearance is ineligible; one other REO in forbearance is OK.
Collections, charge-offs, judgments & liens: Judgments and liens affecting title must be paid. Non-title charge-offs/collections open under 2 years and over $10,000 (individually or combined) must be paid. Medical collections under $50,000 can remain. IRS payment plans OK if current and not liened. Borrowers in credit counseling or debt management are not eligible; no private credit-repair companies.
Tradelines & credit depth: N/A
First-time homebuyer: Allowed: 700 FICO, 75%, DSCR 1.00+, max $750K, no IO or 40-year, no exceptions, not rent-free, motivation letter if not owning a primary.
First-time investor: Allowed: 680 FICO, max 80%, DSCR 1.00+ (no sub-1.00); motivation letter if buying out of state. (Hasn't owned an investment property 12 months in the last 3 years.)
Foreign national: No
ITIN borrower: No
Non-permanent resident: Allowed with 2+ years of legal residency and an eligible visa (E, G, H-1B, L, NATO, O-1, R-1, TN); TPS/parole status must still be in effect.
LLC / entity vesting: LLC, sole proprietorship, LP, LLP, S or C corp (US-registered); up to 4 owners and up to two entities/two layers. Guarantor must be an individual owning 25%+ and is credit-checked like a borrower. No POA when closing in an entity. Revocable trusts per Fannie Mae.
Gift funds & assets: Purchase only, from family. Under 75% LTV no borrower contribution needed; above 75% the borrower must show 5% of their own funds (doesn't have to use them). Not for reserves. Gift of equity from family allowed up to 70% with a 0x30x12 seller mortgage, tenant in place and DSCR 1.00+.
Financed property / exposure limits: Up to 20 financed residential properties; lender exposure $5M or 10 loans.
Other borrower rules: N/A

Property

Eligible property types: SFR, PUD, condo, 2-4, modular; warrantable & non-warrantable condo
ADUs & unpermitted additions: Up to 2 ADUs on a single-family home (not on 4-unit properties; manufactured-home ADUs not permitted), minimum 400 sq ft, typical for the area per appraisal comps, conforming to zoning. Permitted ADU rent counts with a comp that has a permitted ADU, a market rent survey and a lease with 1 month's receipt (on a purchase, the borrower attests they'll rent it). Unpermitted ADUs are acceptable if built in a workmanlike manner and conforming to the property, but their rent can't be used to qualify. Unpermitted room additions: appraiser confirms workmanlike quality.
Non-warrantable condo: Up to two non-warrantable features: presale 30%, investor concentration up to 70%, commercial up to 50%, recreational leases, single-entity ownership up to 30%, HOA delinquencies up to 25%, master deductible up to 10%, reserves under 10% (never below 5%), mandatory memberships up to 10% of price. Ineligible: structural/functional litigation against the developer, less than full replacement-cost insurance, non-gut conversions, flood zones without master flood coverage, incomplete projects or HOA not turned over. California SB326 balcony inspections and Florida structural inspections (30+ years, or 25 near the coast, 3+ stories) required. Limited review established projects: 75% (70% in Florida).
Condotel: Not eligible.
Rural / acreage: Rural and agricultural properties are not permitted (rural zoning, rural appraisal designation, or no paved road). Exception: appraisal marked suburban but zoned rural-residential is allowed at 80% purchase / 75% rate-term / 65% cash-out. Truncating acreage not allowed.
Minimum square footage: 500 sq ft per unit; no kitchenettes
Mixed use: No
5+ units / multi-property: No
Ineligible properties: Manufactured homes, mixed use, condotels, co-ops, rural/agricultural zoning, mandatory rental pools, live/work condos, log homes, domes, unique properties, working farms, boarding houses/room leases, assisted living, timeshares/fractional, tenants-in-common, 'shouses', builder model leasebacks and inventory, under construction, C5/C6, commercial or industrial zoning (except condos), zoning violations, Native American leased land, lava zones (unless meeting Fannie Mae), leased land not exceeding the loan term by 5 years, community land trusts. Under 500 sq ft per unit (no kitchenettes). Mandatory club fees over 10% of price ineligible. Properties near power plants, industrial factories or environmental hazards ineligible.
Declining markets: N/A
Appraisal, review & insurance: One full appraisal plus a review product (CU/LCA 2.5 or less, or a desk review within 10%; otherwise field review or second appraisal). Transferred appraisals OK unless borrower- or seller-ordered. Hybrid appraisals allowed up to $1.5M (680 FICO, 70% purchase / 65% rate-term / 60% cash-out; not for rural, leasehold, 5+ acres, condotels). Rent-loss insurance of 6 months (or 6 extra months of reserves). Declining market −5% (floor 75% purchase / 70% refi).

Rental income

Rent used on a purchase: Market rent (1007/1025); lease <market with <6 mo left → market up to 120%
Rent used on a refinance: Lesser of lease or market; lease above market up to 120% with 3 mo receipts
Vacant / unleased refinance: Market rent may be used on a refinance when the property recently completed rehab or is listed for rent (proof required).
Short-term rental (Airbnb/VRBO): Yes – SFR detached only, 700 FICO, 1 yr STR experience
Short-term rental documentation: Requires a Property Guard report confirming STR permits and that local rules allow STRs; 700 FICO and at least 1 year of STR operating experience in the past 12 months; detached SFR only (no condos or 2–4 units); tax escrow required. Purchase: AirDNA Rentalizer only (default comps, 12-month forecast within 90 days, 50%+ occupancy, 4 comps within 2 miles/same ZIP/submarket), 80% of revenue, DSCR 1.10. Refinance: 12-month average of platform deposits (Airbnb/VRBO/HomeAway/FlipKey – no private managers) including zero months, at 80%, DSCR 1.00; AirDNA and 1007 not allowed.
Short-term rental limits: 75% purchase / 70% refinance; 20% income haircut; 700 FICO; prior STR experience required.

Refinance seasoning

Cash-out seasoning: Existing mortgage must be 6+ months old (except delayed financing). Inherited or legally awarded property has no wait but is capped at 60%. Refinancing a loan that gave cash-out less than 12 months ago counts as cash-out. Paying taxes 60+ days delinquent or loans with 59+ days accrued interest counts as cash-out. Refinancing out of a blanket loan is cash-out. A property the borrower just moved out of needs a lease and 3 months of payments at the new home.
Delayed financing (cash purchase recoup): Allowed for cash purchases owned under 6 months (arm's length, documented funds); priced as cash-out; LTV on the lower of price or appraisal; gift funds can't be recouped.
Recently listed for sale: Can't be listed at application. Seasoning runs from listing removal to the note date; LTV uses the lower of appraisal or lowest list price in the last 12 months. Rate/term without a prepay: not permitted within 6 months, pre-approval for 6–12 months; with at least a 2-year prepay: permitted. Cash-out without a prepay: not permitted within 6 months (70% max with pre-approval at 6–12 months); with a 2-year prepay: 70% max.

Other terms

Seller / interested-party concessions: Up to 6% of the purchase price for closing costs and prepaids only (no cash credit); excess is deducted from price.
Secondary financing: No new subordinate financing (closed-end seconds are a separate product); existing seconds may stay on a refinance if subordinated, and their payments are included in DSCR.
State & local restrictions: California purchases qualify with taxes at 1.25% of price (or documented rate); new construction 1.5% elsewhere.

Additional details

Notes: Declining market −5% (floor 75 purch / 70 refi). 40-yr amortization max 80%. Hybrid appraisal ≤$1.5M, 680 FICO, 70/65/60. Interested party max 6%. Rent loss insurance 6 mo.

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