The Quick Read: Lenders need cash at closing, so you sell the shares, move the net proceeds into your own bank account, and document the full trail, while the loan itself qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Borrowing against your portfolio is a separate route with its own risks. Many programs treat borrowed money differently from your own.
- Shares do not go to the closing table. Cash does, and the lender wants to trace it back to you.
- Most purchase files across the wholesale network land at 75%–80% LTV on an investment property, which means roughly 20%–25% down.
- The down payment and the post-closing reserves are two separate tests. One pile of stock cannot satisfy both.
- Clearing 1.00 coverage does not mean the rental produces positive cash flow.
- Select lenders go to 85% LTV on a purchase with roughly a 700+ score, but that tier is the exception. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
How Does Stock Turn Into a Down Payment?
Stock becomes a down payment only after it becomes cash. You sell the shares, wait for the sale to settle, move the proceeds to a bank account in your name, and keep the statements that show each step. The underwriter then checks that the money is yours and traceable.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
That is the whole mechanism.
Some lenders will count unsold securities toward reserves at a discount. A few programs also look at brokerage balances as supporting assets. Those treatments vary from lender to lender. Never assume your portfolio counts at full value just because the balance looks large.
The property side of the file runs on its own track. A DSCR loan (debt service coverage ratio loan) compares the property’s rent to its full monthly obligation: principal, interest, taxes, insurance and any HOA dues, together called PITIA. The lender does not use your paycheck to size the loan. That is why a stock-rich, income-light first-time investor can fit this product. It is also why the asset paperwork matters more. For the full picture of how the product works, see the complete DSCR loans guide.
Key Terms Defined
DSCR (debt service coverage ratio): the property’s monthly rent divided by its monthly PITIA. A result of 1.00 means rent equals the payment.
PITIA: principal, interest, taxes, insurance and association dues. It is the full monthly housing obligation on the property.
LTV (loan-to-value): the loan amount as a percentage of the purchase price or value. A 75% LTV purchase means about 25% down. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Reserves: cash or liquid assets you still hold after closing. Lenders usually express them as months of PITIA.
Seasoning (of funds): how long money has sat in your account before the lender sees it. Each lender sets its own standard.
Securities-backed line of credit (SBLOC): a loan secured by your investment portfolio, so you borrow instead of selling.
Margin loan: a loan from your brokerage secured by the securities in the account.
Source of funds: the documented origin of the money you bring to closing.
What Does a First-Time Investor Need to Qualify?
A first-time investor needs four things: enough cash for the down payment and closing costs, a credit score that fits the program, post-closing reserves, and a rental that covers its payment. Landlord experience is not the gate. The property’s income is.
Here is how those pieces typically line up across the network of DSCR lenders Lendmire places files with. Every file is underwritten individually, so treat these as ranges, not promises.
- Leverage: most purchase files land at 75%–80% LTV on an investment property. Select high-leverage programs reach 85% LTV, usually with a score near 700 or better.
- Credit: a 620 floor exists in parts of the network. Most programs want around 660. A score of 700 or higher opens the strongest leverage tiers.
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios generally open better pricing and leverage.
- Reserves: commonly around 6 months of PITIA, though they vary by lender, leverage, loan size and transaction type. Loans above $1,500,000 typically step up to about 9 months. Some lenders ask first-time investors for more reserves than the standard file.
- Loan size: up to $3,000,000 on standard programs.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
One more filter: not every building qualifies. Manufactured homes (single- and double-wide), log homes and barndominiums are not offered through these programs.
Sell, Borrow, or Mix: Which Route Works?
Selling is the cleanest route because the lender sees plain cash that you own. Borrowing against the portfolio keeps your shares invested, but it adds debt and some programs treat the proceeds differently from your own funds. A mix of the two is possible but more complicated to document.
NerdWallet’s SBLOC explainer frames the trade-off well. Selling raises cash but gives up the position, and borrowing keeps you invested but adds a loan. Here is how the routes compare for a DSCR purchase.
| Factor | Sell shares | Borrow against portfolio | Hybrid |
|---|---|---|---|
| How lenders view it | Your own cash | Borrowed funds, program-specific | Mixed treatment |
| Paper trail | Sale, transfer, deposit | Loan docs plus deposit | Both trails |
| Market exposure | Reduced | Stays invested | Partly reduced |
| Main risk | Selling at a bad moment | Forced sale if values fall | Both risks |
| Fit for first-timers | Strongest, simplest | Ask your lender first | Case by case |
Margin loans carry a specific limit. Schwab notes that margin borrowing is generally capped at 50% of the investments’ value, and it describes bank securities-based lines as carrying a high degree of risk, similar to margin. FINRA’s investor guidance adds that a falling portfolio can trigger a forced sale and that market swings amplify losses.
Now the broker’s view. Across the wholesale network, many programs want the down payment to come from the borrower’s own verified funds. Borrowed money, including proceeds from a portfolio loan, may be excluded or may bring the new debt into the picture. Programs differ. Ask the lender before you draw on any line, not after.
What Is the Step-by-Step Path From Portfolio to Closing?
The path runs in a fixed order: size the deal, total the cash you need, choose which shares to sell, sell and transfer, build the paper trail, then go under contract with reserves intact. The sale belongs early in the sequence, before you commit to a purchase contract.
1. Size the deal. Pick a target price range and an LTV. At 75% LTV you bring about 25% down. At 80% it is about 20%. Pre-qualify before making offers so you know what the lender will review.
2. Total the cash need. Add the down payment, closing costs and post-closing reserves. Net proceeds from a sale are what count, not the gross balance.
3. Choose the lots to sell. Different share lots can have different purchase dates and costs. Ask your brokerage or CPA about selecting specific lots rather than accepting a default method.
4. Sell and let it settle. Plan the sale early enough that the trade settles and the money reaches your bank before you need it. Do not leave it for the last minute.
5. Move the proceeds to your bank. Transfer to an account in your own name, ideally the one you will use for the deal.
6. Keep the statements. Brokerage statements show the sale. Bank statements show the deposit. Together they close the loop.
7. Run the coverage math. Divide expected rent by the full PITIA of the property you want. If the ratio looks thin, test a larger down payment or a different property before you make an offer.
8. Go under contract and complete underwriting. Respond to lender questions with your documents already organized. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Where does the entity fit? If you plan to hold the property in an LLC, set it up before you apply. LLC-titled purchases are available subject to lender program eligibility, and the sale proceeds still have to be traceable to you.
How Do You Document Money That Came From a Brokerage Account?
Document each link in the chain: the account that held the shares, the sale confirmation, the transfer out, and the matching deposit. Lenders review recent statements and want every large deposit explained. The goal is that nothing looks unexplained.
A practical checklist:
- Recent brokerage statements showing the holding and the sale.
- The trade confirmation for the shares you sold.
- Bank statements showing the matching deposit, with the same amount you transferred.
- A short written explanation if the numbers differ because of fees or withholding.
- Funds left sitting in your account, not shuffled between accounts.
Seasoning matters too. Many lenders want funds to have been in your account for some period before closing, and the period differs by lender. Selling and depositing early gives you room. A sale made days before you need the cash leaves you exposed to any question the underwriter raises.
Keep the statements consistent. If you move money across several accounts, the trail gets harder to follow. One sale, one transfer, one deposit is the easiest file to review.
How Do You Size the Whole Cash Need?
Size it in three buckets: the down payment, closing costs, and reserves. The stock you sell has to cover the first two, and your post-closing balance has to cover the third. Counting the same shares toward both is the most common way a stock-funded file comes up short.
Run the numbers on a modeled first-time investor with a sizable portfolio and little bank cash. These are assumptions for illustration, not market data.
- Purchase of a duplex at 75% LTV, so the down payment is 25% of the price.
- Closing costs sit on top of that down payment.
- Reserves of about 6 months of PITIA must remain after closing.
- Modeled rent covers PITIA at roughly 1.2x. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The investor sells enough shares to cover buckets one and two with a cushion for fees. The reserve bucket must come from somewhere else: remaining cash, or unsold securities if the lender counts them, usually at a discount. If the investor sold only enough to close and nothing is left, the reserve test fails even though the down payment cleared.
Now change one input. Suppose the same duplex comes in near 0.95x on the rent schedule. That is below the 1.00 level where many select programs start. Options a lender would review include a larger down payment, a different property, or a select-lender path that accepts coverage below 1.00 with leverage and terms adjusted. Qualification stays subject to lender guidelines, credit review and the property.
A larger down payment lowers the monthly payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Where the General Rule Breaks
The general rule is sell, deposit, document. These situations bend it.
Shares with different holding periods. Selling stock that has gone up usually produces a taxable gain, and the IRS treats shares held more than one year differently from shares held a year or less; tax treatment varies, so keep clear records and speak with a qualified tax professional. Waiting is a planning lever, but it carries market risk of its own.
Borrowed funds. A portfolio loan or margin draw gives you cash without a sale. Whether the lender accepts it as down payment is program-specific. Some exclude it. Others count the new obligation against you in other ways. Get the answer in writing from the loan officer before you borrow.
Unsold securities counted toward reserves. Some lenders credit a share of brokerage value toward reserves. The discount varies. Do not build your plan around it until a lender confirms.
Gift funds. Gifts can sometimes fund part of the purchase, but programs usually require a minimum contribution from your own funds. This does not replace the stock route. It supplements it.
Short-term rental as a first purchase. The network allows it, with tighter terms. Purchase leverage tops out at 75% LTV, and expect a 640+ score, about 12 months of hosting history, and a 1.00 coverage floor on purchases. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Sub-1.00 coverage. Programs below 1.00 are available through select lenders in the network, with leverage and terms adjusted. Expect a larger down payment.
Investment-property HELOC lines cap at $500,000 total.
What Happens If Something Moves Before Closing?
Three things can move against you: the appraisal, the market, and the first months of ownership. Test each one before you sell a single share.
A low appraisal or rent schedule. If the appraiser’s rent estimate comes in below your projection, the coverage ratio drops. Keep a little room above 1.00 so a modest miss does not break the file. Selling extra shares to cover a gap is possible, but it pulls cash out of the reserve bucket.
A market drop after you sell. Once you sell, the cash is cash. A drop after the sale does not change your down payment. A drop before the sale can shrink what you net. If you borrowed against the portfolio instead, a decline can trigger a margin call or demand for more collateral, and your lender may not accept the proceeds in the first place.
A vacancy. Coverage is measured on paper. Real life includes empty months. The DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside it. Clearing 1.00 does not mean positive cash flow. Leave extra cash beyond the required reserves if you can.
One more honest point. Pulling stock out of the market means giving up whatever those shares might have earned. That opportunity cost is real. Weigh it against what the rental is expected to produce, not just against whether the file qualifies.
Is This Route Right for You?
Use this stock route when the answers below are mostly yes.
- Do you have enough in the portfolio to cover the down payment, closing costs and reserves as three separate buckets?
- Can you sell without forcing losses you would regret?
- Is your credit around the 660 mark or better, or 700+ if you want more leverage?
- Does the property’s rent clear the coverage level your lender needs, with some room to spare?
- Can you keep a cash cushion for repairs and vacancy beyond reserves?
If you answered no to the first two, consider waiting, buying a smaller property, or using a different source of equity. If your credit is below the typical band, the 620 floor exists only in parts of the network, and leverage will be lower. Lendmire’s piece How to Run the DTI Math Before Using a HELOC as a Down Payment is a useful comparison if home equity is also on the table.
Selling a position is not a decision to make on impulse. Treat it as a purchase plan with a start date.
Frequently Asked Questions
Do I need landlord experience to buy a first rental on DSCR?
No. The file centers on the property’s rent, your credit, your cash and your reserves. Experience is not the gate. First-time investors can see tighter reserve expectations with some lenders, so confirm the requirement before you set your cash target.
Is it better to sell stock or borrow against it for the down payment?
Selling is simpler because the lender sees your own cash. Borrowing keeps you invested but adds debt and the risk of a forced sale if values fall. Many programs treat borrowed funds differently from your own, so ask the lender before drawing on any line.
Can I use the same stock for the down payment and the reserves?
No. A share you sell for the down payment is gone from the reserve count. Reserves are what remains after closing, commonly around 6 months of PITIA, though they vary by lender, leverage and loan size. Plan the two buckets separately.
Do margin or securities-backed line proceeds count as a down payment?
It depends on the program. Many lenders want the down payment to come from your own verified funds, and borrowed money may be excluded or reviewed differently. Get the lender’s answer in writing before you borrow.
Can I buy a first short-term rental this way?
Yes, in some cases, with tighter terms. Purchase leverage tops out at 75% LTV, and lenders usually want a 640+ score and about 12 months of hosting history. Coverage floor on a purchase is 1.00. Confirm local short-term rental rules first.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a mortgage broker arranging financing through select lenders in its wholesale network, with DSCR programs in 41 markets, including Washington, D.C. You can reach the team at 828-256-2183. Programs change, and every file is underwritten individually, so this is not a commitment to lend.
The cleanest stock-funded purchases are planned backward from the closing date, with the sale, the paper trail and the reserves all settled before the offer goes in.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. NerdWallet: Securities-Based Line of Credit
2. Schwab: 3 Ways to Borrow Against Your Assets
3. FINRA: Securities-Backed Lines of Credit
4. IRS Topic 409: Capital Gains and Losses
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a VA Cash-Out Refinance Fund a Rental Down Payment? · How to Prepare a Rental Property for a DSCR Appraisal · How to Fund a First Airbnb Down Payment With a HELOC and DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.