The DSCR Mortgage Program

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All borrowers must presently own their primary residence. This requirement may be waived if the borrower can clearly demonstrate that the subject property is rental in nature and inferior in size and quality to their primary residence (leased or owned). 

The borrower must be renting another residence and the lease must continue for the foreseeable future (minimum of 6 months). Exceptions will be considered on a case-by-case basis when the borrower lives rent free in a home owned or leased by their Spouse and/or parents. The borrower is required to provide an adequate explanation with supporting documentation on why they live and plan to remain in their current primary residence. 

• A 36 month history of using credit in the U.S. with 3 tradelines that have been reporting payments/usage for 12+ months and have been active some time in the last 12 months; OR
• 2 tradelines that have been reporting payments/usage for 24+ months with some activity in the past 12 months.
• A tradeline is typically a credit card, personal loan, or car loan.  But some lenders will allow you to use other accounts as tradelines such as cable, utility, or cellphone accounts.
• If a complete credit history is not available you may be able to supplement your credit history by providing a history of paying rent on time.  This can be provided via a verification from the landlord or through other sources.  
• A credit score of at least 620 is required for most lenders.

None Required.

         SHORT TERM RENTAL INCOME

Short term rentals through companies such as VRBO, Airbnb, or Homeaway are eligible for qualification under the DSCR program. DSCR will be calculated based on the market rent as provided by the appraiser. The higher short term monthly rent can be used to calculate the DSCR percentage when 12-months proof of rent is provided in the form of a 12-month ledger from the company marketing the property (i.e., VRBO, Airbnb, or Homeaway, etc.). 

The 12-month rent total will be averaged monthly to calculate the DSCR.  Additional documentation may be required.  A ledger is only required if the short-term rental income will be used to qualify in lieu of the appraiser’s opinion of market rent. 

  ACCESSORY DWELLING UNITS ("ADU")

Long term rental income from an ADU on the subject property is eligible for use when the following terms are met:

• ADU must meet minimum property size of 600 sq ft.
• Appraiser must provide at least 2 rental comparables with ADU’s that are being rented. The appraisal must break down the difference in rent between the main dwelling and the ADU. 
• The lower of the Market Rent (Main Dwelling + ADU) or the Current Leases will be used.
• Lease for the ADU and main dwelling will be required when the current rent for both dwellings is being used in lieu of the Market Rent.  Proof of 6 months receipt is required.
• Rental income can be used for no more than One ADU.
• Short-term rental income cannot be used for an ADU.

               GENERAL LOAN TERMS

• 30 year fixed rate mortgage with no prepayment penalties
• 40 year fixed rate mortgage with no prepayment penalties
• Adjustable Rate mortgage with no prepayment penalties
• Interest only options available
• Loan Amounts to $5m
• Rent loss insurance for the subject property is required and must equal at least 6 months of local average monthly rents. Blanket policies covering the subject property are permitted. 

                            RESERVES

In addition to the down payment and closing costs, the Buyer will have to show they have enough funds in their account(s) to cover at least 3 months of mortgage payments including principal, interest, property taxes, homeowners insurance, and association/condo fees (if applicable).  

Required reserves will depend on the loan amount as follows:

• $150,000 - $500,000 = 3 months
• $500,000 - $999,999 = 6 months
• $1,000,000-$1,499,000 = 9 months
• $1,500,000+ and all Second Homes = 12 Months
• Interest Only = 6 months minimum. 

Vesting in the name of an LLC is allowed provided it is a solely business-purpose loan to be used for the purchase or refinance of an investment property.  The following requirements apply:

• Purpose of the LLC is for the ownership and management of real estate.
• The borrower(s) must be majority owners or managing members of the LLC. For LLC’s with multiple owners, each borrower own no less than 25% of the vesting business. All of this information must be supported in the operating agreement and/or the articles of incorporation.  
• The loan must be disclosed to all borrowers.

The following LLC documentation must be provided:

• Articles of Incorporation
• Operating Agreement
• Tax Identification Number
• Certificate of Good Standing

A personal guaranty is required if the property will be vested in an LLC.  The personal guarantor is subject to the following requirements:

• The guarantor must be an individual person and not a business entity.
• The guarantor must be a managing member or majority owner of the business entity. Each borrower can own no less than 25% of the vesting business.
• The guarantor is subject to the same credit requirements and fraud checks as individual borrowers.