Question 1

How does a lender calculate DSCR?

Accepted Answer

Most lenders divide qualifying rental income by PITIA — principal, interest, taxes, insurance, and any association dues. A property with $2,400 of supportable rent and $2,000 of PITIA calculates to a 1.20 ratio. Program guidelines define which income and expenses are eligible.

Question 2

What DSCR ratio do lenders look for?

Accepted Answer

Requirements vary by program. Many investor programs look for a ratio at or above 1.00, with stronger pricing above roughly 1.20, and some allow lower ratios with offsetting factors. Mayday confirms the applicable threshold against current guidelines for your scenario.

Question 3

Which rent figure is used — actual or market?

Accepted Answer

Underwriting generally compares the lease in place with the appraiser's market rent opinion (commonly Form 1007 or 1025) and uses the more conservative supportable figure. Unsigned, above-market, or related-party leases receive extra scrutiny.

Question 4

Are short-term rental revenues counted?

Accepted Answer

Some programs consider documented short-term rental history, often through platform statements or a market rent study. Others qualify only on long-term market rent. Availability depends on the property, location, and current guidelines.

Question 5

Do lenders verify personal income on a DSCR loan?

Accepted Answer

A DSCR loan qualifies primarily on property cash flow rather than traditional personal income documentation. Lenders still review credit, liquidity, reserves, experience, and the borrowing entity.

Question 6

Can the loan close in an LLC?

Accepted Answer

Investment-property lending is commonly done in an LLC or corporation, with personal guarantees typically required. Lenders request formation documents, the operating agreement, an EIN, and a certificate of good standing.

Question 7

What credit profile do lenders review?

Accepted Answer

Credit score, recent mortgage history, and any significant derogatory events all factor into eligibility and pricing. Select programs reduce or remove credit checks for eligible transactions, and availability is confirmed during review.

Question 8

How many months of reserves are required?

Accepted Answer

Reserve requirements are usually stated in months of PITIA and scale with loan size, property count, and ratio strength. Underwriting verifies them with recent bank or brokerage statements.

Question 9

What appraisal products do lenders order?

Accepted Answer

A full interior appraisal is typical, often paired with a rent schedule. Condition ratings, deferred maintenance, and habitability findings can require repairs or a revised structure before closing.

Question 10

Is there a seasoning requirement for cash-out?

Accepted Answer

Many programs apply ownership or value seasoning before using the appraised value on a cash-out refinance, with shorter timelines when documented rehab costs support the new value. Requirements vary by program.

Question 11

What title and insurance items get flagged?

Accepted Answer

Lenders review the title commitment for liens, judgments, and prior transfers, and check that hazard, liability, flood where applicable, and — for a vacant or rehab property — builder's risk coverage carry adequate limits and correct loss-payee wording.

Question 12

Which property types cause the most questions?

Accepted Answer

Condos with limited reserves or high investor concentration, rural properties, mixed-use with heavy commercial space, properties under active renovation, and unusual square footage or comparable support tend to require additional review.

Question 13

What leverage do lenders typically allow?

Accepted Answer

Maximum LTV depends on the transaction type, ratio, credit, property type, and occupancy. Purchase leverage usually exceeds cash-out leverage. Select programs offer higher combined leverage on eligible transactions, subject to underwriting.

Question 14

How fast can a DSCR loan close?

Accepted Answer

Timelines depend on appraisal availability, title work, insurance binders, and entity documents. A complete file with those items ready moves fastest; missing third-party reports are the most common delay.

Question 15

What exit plan do lenders want to see for a rehab?

Accepted Answer

Underwriting wants a credible sale or refinance exit: supported after-repair value, a realistic budget and timeline, a capable contractor, and reserves to carry the project if the timeline slips.

Question 16

What causes a file to be declined late?

Accepted Answer

Late declines usually trace to valuation coming in below expectation, rent not supporting the ratio, title or lien surprises, insurance costs higher than modeled, or reserves and entity documentation that cannot be verified.

The DSCR loan questions lenders actually ask.

How the ratio is calculated

Borrower, entity, and credit questions

Property, valuation, and title

Structure, timeline, and exit

Have a question underwriting hasn’t answered yet?