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DSCR LOAN MATRIX

Loan Purpose

  • Purchase

  • Limited Cash-out Refinance

  • Cash-out Refinance

  • Delayed Financing Refinance

  • CEMA

Occupancy Types

  • Investment properties.

Interest Only

  • Max 80% LTV/CLTV

  • Minimum 660 FICO

  • 10-year Interest Only period followed by a 20-year or 30-year amortization period.

  • Qualifying is based on ITIA payment.

LTV/CLTV

Purchase

  • Loan amount: =< $1,500,000 - 80%​

  • ​Loan amount: $1,500,001 - $2,000,000 - 75%

  • Loan amount: $2,000,001 - $3,500,000 - 70%

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Rate / Term Refinance​

  • Loan amount: =< $1,500,000 - 75%​

  • Loan amount: $1,500,001 - $2,000,000 - 70%

  • Loan amount: $2,000,001 - $3,500,000 - 65%

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Cash-out Refinance​

  • Loan amount: =< $1,500,000 - 75%​

  • Loan amount: $1,500,001 - $2,000,000 - 70%

  • Loan amount: $2,000,001 - $3,000,000 - 65%

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If Bankruptcy, Foreclosure, Short Sale, Deed In Lieu, or Default Modification is less than 2 years:

  • Max 75% LTV Purchase

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  • Max 70% LTV Rate/Term and Cash Out.

Loan Amount Limits

  • Minimum loan amount: $100,000.00

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  • Maximum loan amount: $3,500,000

Maximum Cash OUt

  • LTV/CLTV equals or less than 65% - $500,000.​

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  • LTV/CLTV is less than 65% - $1,00,000.

Delayed Financing Refinance

Delayed purchase financing is eligible when a property was purchase by a borrower with cash within 180 days of the loan application.​

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  • The original purchase transaction was an arms-lenth transaction.

  • The source of funds for the purchase transaction are documented.  (If the source of funds are gift frum family and documented according to FNMA guidelines, transaction is eligible for delayed financing).

  • The maximum LTV/CLTV is based upon the lower of the current appraised value or the property's purchase price plus documented improvements.

  • The preliminary title search or report must confirm that there are no existing liens on the subject property.

  • The transaction is considered cash-out .

Investor Experience

  • The borrower must have a history of owning and managing commercial or non-owner occupied residential real estate for at least 1 year in the last 3 years.​

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  • First Time Investor must have 680 FICO, and no mortgage lates in the past 36 months.

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  • First Time Home Buyer is not allowed.

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  • Experience can be documented by one of the following:

    • Complete the REO schedule on the FNMA 1003 loan application, or​

    • Provide a property profile report, or

    • Other 3rd party documentation.

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Subordinate Financing

  • ​Seller carried subordinate financing is ineligible.

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  • Existing subordination is permitted on refinances.

Limits on Number of Financed Properties

No limit to the number of financed properties.

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Borrower Eligibility

  • U.S. Citizens

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  • Permanent Resident Aliens

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  • Inter-Vivos Revocable Trust

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  • Deferred Action for Childhood Arrivals (DACA)

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  • First Time Investor

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  • Limited Partnerships, General Partnerships, Corporations, Limited Liability Company (layered entities not permitted, such as whose members are trust)

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Income and Employment

The stable and reliable flow of income is a key consideration in mortgage loan underwriting.  A key driver of successful homeownership is confidence that all income used in qualifying the borrower will continue to be received for the foreseeable future.  If the income does not have a defined expiration date and the applicable history of receipt of the income is documented, the income is considered as stable, predictable, and likely to continue.  Otherwise, additional documentation from the borrower will be required to analyze the likelihood of the income will continue for at least next three years. 

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Employment income refers to the income received from work in the form of W-2.  Verification of the most recent two years of employment and income are generally required.  It can be done by obtaining copies of the most recent pay stubs, IRS Form W2's, and a written Verification of Employment (VOE), or direct electronic verification of employment by a TPV vendor.  Primary employment is considered if the employee typically works 40 hours of service per week. If it is less than 40 hours of service per week, it is considered as part-time employment.  Both types of employment are acceptable, however, part-time employment should have a recent 2-year consecutive employment and it is likely to continue.  Similar with part-employment, these employment or incomes are also acceptable, such as seasonal employment, overtime, bonus, tips, commission.

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Self-employment income refers to income generated by a business in which the borrower has a 25 percent or greater ownership interest.  Self-employment income can be used if the borrower has been self-employed for at least two years.  However, if the borrower has less than two years history, self-employment income may only be considered if the borrower was previously employed in the same line of work or in a related occupation for at least two years.  The lender will review the self-employment income based on the recent Federal tax returns.  In addition, a year-to-date Profit and Loss (P&L) statement and balance sheet are required if more than a calendar quarter has been elapsed since the date of the most recent calendar or fiscal year-end tax period.

 

Other sources of income are also acceptable are: Social Security disability, VA disability, private disability, alimony, child support, maintenance income, military income, retirement income, rental income, capital gains or losses, Trust income, Annuities, Note receivable income, royalty payment income, boarder income.

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Asset Assessment

Lenders will need to verify a borrower has sufficient funds for closing, down payment, and financial reserves (if applicable) with these following types of documentation: Request for Verification of Deposit (Form 1006), copies of bank statements or investment portfolio statements, copies of retirement account statements.  Statements should not be 45 days earlier than the date of the loan application.  Either the two- or one-month period of account activity will be needed depending on the loan application type. 

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Any deposit exceeding 50% of the total monthly qualifying income will be considered as a large deposit, and it needs to be evaluated; otherwise, the verified balance must be reduced by the amount or portion of the undocumented large deposit.  

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Reserves are measured by the number of months of PITIA that a borrower could pay using his or her financial assets.  Borrowers with multiple properties must meet the reserve requirements for each individual loan basis and each additional loan must have an additional six (6) months of reserves.  Reserves must be verified and comprised of liquid assets the borrower can readily access.  Cash Out and Gift Funds may be used to meet reserve requirements. Restricted stock is not an acceptable source to meet reserve requirements.

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  • If loan amount is up to $1,500,000 - 2 months.

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  • If loan amount is greater than $1,500,000and up to $2,500,000 - 6 months.

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  • If loan amount is greater than $2,500,000 - 12 months.

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Gift Funds

  • Purchase transaction only.

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  • Gift Funds are not allowed for 2 - 4 Mixed Use Properties.

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  • Borrower must contribute 10% of their own funds.

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  • Gift funds must be from a family member as defined by Fannie Mae.

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  • Gift of equity is not permitted.

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  • Non-permanent Residence Aliens - Gift funds not allowed.

Credit Score / History

All borrowers must have a minimum of 2 credit scores.  Each borrower must have 2 tradelines or joint borrowers must have a total of 3 tradelines combined, rated at least 12 months, with activity in the last 24 months.  Tradeline may be opened or closed.  Eligible tradelines cannot have any derogatory history in previous 24 months.   

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No authorized user accounts will be used to satisfy minimum tradelines.  Non-traditional credit is not allowed as an eligible tradeline.

 

A credit freeze may remain if it is reported under one bureau only.  More than one frozen bureau requires the freeze to be lifted by the borrower and a new report provided.  

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Rapid rescore of credit permitted for confirmation of pay down and/or payoff of debt and correction of reporting errors.

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All borrowers must have a mid FICO of 660 or higher.

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A minimum of twelve (12) months verified housing history is required with no late.  Borrowers with no mortgage/rental history will require an exception and is limited to max 80% LTV.  If the housing history reflects a forbearance, documentation from the servicer of the completion is required.  The deferred balance may be paid off with the subject property refinance. 

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Derogatory Credit Events in the Credit Report

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  • All bankruptcies must be settled and discharged a minimum of twenty-four (24) months from the Note date.

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  • Forbearance, loan modification, or deferrals completed or reinstated greater than 12 months from the Note date of the subject transaction and having no late are allowed.

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  • Liens or judgements that have the potential to impact lien position must be explained and paid off.

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  • Non-title charge-offs and collection open less than 2 years and exceeding $10,000 must be paid.

  • The total aggregate balance of accounts in dispute remaining unresolved may not exceed $2,000.

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  • Medical collections less than $15,000 are not required to be paid.

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  • IRS tax payment plans approved by IRS are permitted if current and do not carry a lien on any property.

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Debt-to-Income (DTI)

  • LTV/CLTV greater than 85% - max DTI is 45%

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  • LTV/CLTV equal or less than 85% - max DTI 50%

DSCR Calculation

Lessor of Market Rent or current lease divided by PITIA.​

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Monthly Gross Rents / PITIA = Debt Service Coverage Ratio.

Lease Requirements - Long Term Rental

  • Purchase Transactions:

    • Monthly Gorss Rents are the monthly rents established on FNMA Form 1007 or 1025 reflecting long term market rents​.

    • If subject property currently tenant occupied, the 1007 or 1025 must reflect the current monthly rent.

    • A vacant or unleased properties are allowed without LTV restriction.

  • Refinance Transaction:

  • FNMA Form 1007 or 1025 reflecting long term market rents and lease agreement.

  • If the lease has been converted to month-to-month, then provide the most recent two (2) months proof of receipt to evidence continuance of lease.

    • If unable to provide evidence of receipt, the unit will be treated as vacant and subject to the 5% LTV reduction and use of market rent.​

  • If using a higher monthly actual lease amount, evidence of 2-months of receipt is required, and the lease amount must be within 120% of the estimated market rent from the 1007 or 1025.

  • A vacant or unleased property is allowed, and the maximum LTV allowed is restricted by 5%.
     

Lease Requirements - Short  Term /  Variable Rental

  • A 5% LTV reduction applies to all transactions using short-term rental income when the DSCR is >= 1.00 (excludes Condotel projects).

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  • DSCR Calculation:

    • Monthly gross rents based upon a 12-month average, to account for seasonality required.​

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    • Gross rents reduced by 20% to reflect extraordinary costs associated with operating short-term rental property compared to non-short-term property.  

      • (Gross rents x 0.80)/PITIA = DSCR - (Ex. $2,500 x 0.80)/$2,000 = 1.00 DSCR​

    • Any of the following methods may be used to determine gross monthly rental income:

      • a 1007 or 1025 Comparable Rent Schedule survey​

      • The most recent 12-month rental history statement from the 3rd party rental/management service.

      • The most recent 12-month bank statements from the borrower evidencing short-term rental deposits.

Property Eligibility

  • SFR - attached or detached

    • Mininum 700 sq. ft.​

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  • 2 - 4 unit

    • Minimum 400 sq. ft. per individual unit.​

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  • PUD - attached or detached​​

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  • Modular (pre-fab)

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  • Condo Hotel (Condotel)

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  • Warrantable Condo

    • Minimum 500 sq. ft.​

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  • Non-Warrantable Condo

    • Minimum 500 sq. ft.​

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  • 2 Acre Maximum

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 Condo Hotel                   (aka Condotel)

  • Projects that are managed and operated as a hotel or motel, even though the units are individually owned.

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  • A project that includes registration services and offers rentals of units on a daily, weekly, or monthly basis.

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  • Gross rents must be reduced by 20% to reflect extraordinary costs associated with operating short-term rental property compared to non-short-term property.

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  • Maximum LTV/CLTV:

    • Purchase: 75%​

    • Rate/Term and Cash-Out: 65%

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  • Maximum loan amount: $1,500,000

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  • Minimum square footage: 500 square feet.

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  • Full functioning kitchen.

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  • Bedroom required.

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Interested Party Contributions

Maximum Interested Party Contributions may not exceed 3%.

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