Home Sweet… Nope
A detached house built for one household falls into this DSCR-eligible property category
What is a single-family residence / SFR?
Eligible Property Types
Townhomes
Planned Unit Developments (PUDs)
Duplexes, triplexes, and fourplexes.
Warrantable Condominiums
All DSCR leases must have an initial term of at least this length.
What is 6 months?
Ineligible Lease Terms
Leases longer than 3 years
Leases with purchase options
Leases to entities (rental arbitrage setups)
This most common business structure often holds rental properties and is acceptable for DSCR loans.
What is an LLC?
Remember The borrowing LLC must be properly registered and in good standing in the state where it is conducting business — meaning: If the LLC is registered our of Wyoming and the property is in Texas the LLC needs to be registered to be authorized to do business in Texas
RCC pulls this type of credit report combining data from the major bureaus.
What is a tri-merge credit report?
This credit pull does not appear as a hard inquiry on the borrower’s credit report.
Borrowers must provide asset statements covering at least this many months.
What are 2 months?
Full bank statement, all pages No Alterations! Two months of statements allow underwriting to verify ownership of funds and confirm the money is seasoned.
A refinance is considered rate/term when the borrower receives no more than this percentage of the New Note amount in proceeds.
What is 2 percent?
If the settlement statement shows he borrower is receiving over 2% the transaction is now considered cash out and would need to be re-underwritten.
Example $200k note over $4000 the deal changes so be mindful
Residential properties become ineligible when they reach this number of units.
What are 5 units?
Example:
One parcel with six separate buildings, even if each has its own address, is still considered a 6-unit property — which falls into multifamily (5+ units) and is not DSCR eligible.
For an established lease, DSCR underwriting requires at least this much rent history.
What are 2 months of rent verification?
A lease on paper isn’t enough — payments must be proven. No proof of payment = no qualifying rent. Rember if the lease says they only accept rent via Venmo then that is the history you need to show. If they are accepting it in other forms update the lease b4 UW'ing!
This trust type allows the borrower to maintain control of the property and is eligible.
What is a Revocable Trust?
Key points:
The borrower can change or dissolve the trust
This borrower action prevents lenders from pulling a credit report until it is lifted.
What is a credit freeze?
A frozen bureau prevents underwriting from obtaining a valid credit report. The borrower must temporarily lift the freeze so credit can be repulled.
If one bureau returns “no score,” the loan can still proceed. A frozen bureau, however, stops the process until resolved.
Business bank accounts are eligible only if this is verified.
What is borrower ownership and access?
Underwriting must confirm the borrower can legally and practically move the funds for the transaction. The borrower must prove they own the business and have access to the funds — not just that the account exists.
An appraisal becomes unusable for DSCR loans once it exceeds this number of days from origination.
What is 120 days?
Other Documents -Background Check, Credit Report, Flood Certificate, OFAC and Title 90 days
Assets, VOM or Equivalent 60 day
A single-family property becomes ineligible when its living area is smaller than this square footage.
What is 600 square feet?
SFR 600 sq ft
Condo600 sq ft
2–4 Unit Property400 sq ft per unit
When the in-place lease rent exceeds market rent, DSCR qualification uses the lower of market rent or this percentage of market rent.
What is 105 percent?
Even if a tenant is paying above market, underwriting caps qualifying rent at 105% of market to avoid relying on unsustainable lease amounts.
This business structure passes income directly to its owners and can be an eligible DSCR borrower.
What is an S-Corporation?
S-Corps act like corporations legally, but like individuals for tax purposes — that’s why underwriting can work with them.
When three credit bureaus return, RCC uses this score to qualify the borrower.
What is the middle score?
If only two bureaus return, underwriting uses the lower score instead.
Not the best score. Not the worst. The one in the middle.
Retirement accounts are eligible for reserves but are counted at only this percentage of their value.
What is 60 percent?
Checking / Savings100%
If RCC’s review of value differs from the appraised value by more than this percentage, the loan is qualified using the lesser of the appraised value or the underwritten value.
What is 5 percent?
≤ 5% variance from appraised value: appraised value may be used to qualify the loan.
> 5% variance from appraised value: underwritten value will be used to qualify the loan
Properties exceeding this lot size are not eligible for DSCR financing.
What is more than 10 acres?
A lease becomes ineligible when it includes this feature allowing the tenant to acquire the property.
What is a purchase option?
Other Ineligible Lease include, corporate rental, Lease over 3 years initial term, room rent, Leases on Non-Residential Structures
Shops
Garages
Outbuildings
Barns or detached structures
This structure removes control from the borrower and is not eligible for DSCR loans.
What is an Irrevocable Trust?
Irrevocable means ownership control has been given away — underwriting can’t treat it like borrower-owned property.
This type of criminal conviction makes a borrower ineligible no matter how old it is.
What is a felony conviction?
Felonies and financial crimes (fraud, embezzlement) are non-starters regardless of age.
Funds from this type of business account cannot be used as borrower liquidity.
What is a business line of credit?
Liquidity must show financial strength, not additional leverage.
A BLOC:
Increases debt
Can be pulled at any time by the bank
Is not the borrower’s capital
Minimum ownership seasoning required for most refinances not classified as delayed purchases.
What is 3 months?
Now delayed Purchase Financing property acquired within the most recent 180 days, where the property is owned free & clear. • The original price obtained without existing debt, (original purchase SS) then Lesser of purchase price + acceptable cost basis (documented improvements + closing costs) or AIV is used when calculating LTV. Rate/Term Refinance
Properties with appraisal condition ratings of these levels are considered not lease-ready and therefore ineligible.
What are C5 or C6?
C5 means fix it. C6 means forget it! C5 – Major Deferred Maintenance - C6 – Severe Damage
C1 – Brand New
C2 – Like New
C3 – Well Maintained
C4 – Minor Issues
Some deferred maintenance or small repairs needed, but still livable.
Section 8 leases require a valid HAP agreement and this amount of rent verification.
What are 3 months?
Housing Assistance Payments
It’s the official contract between:
The property owner (landlord)
The Public Housing Authority (PHA)
Guarantors must collectively hold at least this percentage ownership of the borrowing entity.
What is 51 percent?
Guarantors must have majority ownership and control of the borrowing entity — If they don’t own the majority, they don’t control the risk.
This is the maximum mortgage late history allowed in the past 12 months.
What is 0x30x12?
This goes for any mortgage related trade line on any property. HELOC's included. Unlike revolving or installment debt, mortgage lates are treated as a major risk indicator.
Newly opened accounts must show this from the original source of funds.
What is 60 days of seasoning?
When funds sit in a new account, underwriting must trace the money back to its original source to confirm it is seasoned and not recently borrowed.
A loan with DSCR of 1.20x and a $1.3MM loan amount falls into this reserve tier.
What is the 3-month PITIA reserve tier?
Reserve Requirements (3) months (P)ITIA reserves are required where either: • DSCR ≥ 1.15x • Loan Amounts < $1.5MM (6) months (P)ITIA reserves are required where either: • DSCR < 1.15x • Loan Amounts ≥ $1.5MM