The Quick Read: Three gates decide this loan. The loan-size band sets your leverage, the ADU must be legal before its rent counts, and the property’s rent must cover the larger new payment. Lendmire arranges these files through select wholesale lenders, and every figure here is a ceiling, subject to underwriting.
- Cash-out on a standard rental tops out at 75% on loans to $1,000,000. The ceiling steps down as the loan grows and stops above $3,000,000.
- A legal, permitted ADU can add rent to the coverage test. An unpermitted one is generally left out.
- A coverage ratio of 1.00 earns full leverage. Below 1.00 is a path through select programs, with LTV and terms adjusting, subject to underwriting.
- Reserves are typically six months on the subject property, and cash-out proceeds never count toward them.
- Above $2,000,000 expect two appraisals.
What Is This Loan, Exactly?
It is a refinance that pulls equity out of a high-value rental, qualified mainly on what the property earns. The “super jumbo” label has no official definition. No regulator draws that line. It simply means a loan above a lender’s standard program ceiling.
Lendmire’s standard DSCR program stops at $3,000,000. The portfolio investor ladder it places files on runs from $150,000 to $10,000,000. That ladder carries qualified investors past the standard ceiling, with tighter leverage at each step.
Credit, reserves, the appraisal, and property eligibility still get reviewed. Think of it as underwriting that looks at the building first and the borrower second. For the full picture of how these loans work, see the complete DSCR loans guide.
Key Terms Defined
Super jumbo loan: a mortgage above the size where a lender’s standard program ends. The cutoff is set by each lender, not by any agency.
DSCR (debt service coverage ratio): the property’s monthly rent divided by its full monthly obligation. A result of 1.00 means rent just covers the payment.
PITIA: principal, interest, taxes, insurance, and association dues. It is the payment figure the rent is measured against.
ADU (accessory dwelling unit): a second, self-contained living space on the same lot. Examples include a garage apartment, a backyard cottage, or a basement unit with its own entrance.
Cash-out refinance: a new loan larger than your payoff and closing costs. You keep the difference.
LTV (loan-to-value): the loan balance as a percentage of the appraised value.
Seasoning: the waiting period a lender wants after you buy a property before it will refinance. Programs count it differently.
Business-purpose loan: financing for a property held to earn income, not to live in.
How Do Lenders See a Property With an ADU?
Lenders see the ADU as conditional income, not automatic income. The first question is legal status. Is the unit permitted, and does the local record show it? If yes, its rent can usually join the coverage test. If not, the main house may have to carry the loan alone.
The second question is classification. A main house with an accessory unit can be read as one property with extra rent, or as a two-unit income property. Properties of one to four units are eligible in the network. Which reading applies comes down to the program and the appraiser’s property-type call. That choice changes how rent is documented.
It also changes which appraisal forms are used. The industry borrows two agency form names for this. Per the Fannie Mae Selling Guide, Form 1007 is the rent schedule for one-unit investment properties. Form 1025 is the small income property report for two- to four-unit properties. DSCR is not an agency product, so these are only form names. Treatment is set by the lender.
Appraisers apply the same permit logic. A contractor-side explanation from BuildWithAPlan says appraisers confirm a unit is permitted before assigning it value, and that an unpermitted unit typically adds none. Treat any claim that an ADU adds a fixed percentage to value with caution. A legal ADU may support a higher appraised value, depending on comps and underwriter review.
How is ADU income treated?
| ADU status | How the income is usually treated |
|---|---|
| Permitted and leased | Lease rent can join the test |
| Permitted and vacant | Appraiser’s market rent may be used |
| Unpermitted | Generally excluded from income |
| Short-term rental use | Documented operating history, at a discount |
The short-term row has its own rules, covered below.
How Does Loan Size Shape What You Can Take Out?
Loan size sets the leverage ceiling, and the ceiling falls as the balance grows. The bands apply to the loan amount, not the purchase price or the value. Work out the loan first, then read the band for that loan.
For most investors the surprise is how little cash a very large balance can release. The table shows the best available ceiling in each band at coverage of 1.00 or higher, through select wholesale programs, subject to underwriting.
| Loan band | Purchase | Rate-and-term | Cash-out |
|---|---|---|---|
| $150K–$1M | 80% | 80% | 75% |
| $1M–$1.5M | 75% | 75% | 70% |
| $1.5M–$2M | 75% | 75% | 60% |
| $2M–$3M | 75% | 75% | 60% |
| $3M–$4M | 65% | 65% | — |
| $4M–$6M (on review) | 60% | 60% | — |
| $6M–$10M (on review) | 60% | 60% | — |
Above $4,000,000 every request is reviewed case by case before submission. Treat any figure there as a ceiling on review, never a flat promise.
The credit score behind each cell matters too. The program floor is 660 on loans to $3,000,000, and 700 above that. The top cash-out cell needs 660 or better up to $1,000,000. It needs 700 or better from $1,000,000 to $1,500,000. From $1,500,000 to $3,000,000 it needs 720 or better. A lower score takes a lower leverage cell in the same band.
Proceeds carry their own limits. Cash-out proceeds are unlimited at or below 60% LTV. Above 60% they are capped at $1,500,000. Borrowers at 680 or lower get no cash-out above $1,500,000. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Above $3,000,000 the file is purchase or rate-and-term only. That overlay also requires a 0x30x24 housing history, 48-month seasoning after a credit event, and citizens or permanent residents. It excludes rural property and caps acreage at ten acres on a non-rural property. The ADU does not move any of these hard stops.
What Does the Coverage Test Look Like With and Without the ADU?
The ADU matters because a cash-out raises the balance, and a bigger balance lowers the ratio. The rent has to cover a heavier payment than before. A legal ADU can be the difference between clearing 1.00 and missing it.
Run the numbers on a modeled example. These are assumptions, not market data. Say a main house on a large lot supports coverage of about 1.05x on the new loan. Add a permitted, leased ADU and the combined rent pushes coverage to roughly 1.25x. Same loan, same property, a much stronger file.
Now flip it. Suppose the ADU is unpermitted. The lender counts the main house alone, and the file sits near the 1.00 line. A small appraisal miss then tips it below.
Two levers help when coverage is thin. Take less cash, which shrinks the balance and lifts the ratio. Or move to a rate-and-term refinance, which allows more leverage and releases no extra cash.
Below 1.00 there are paths. Select programs in the network review coverage below 1.00 on loans to $2,000,000, with LTV and terms adjusting, subject to underwriting. Interest-only terms may also help, since coverage is then measured on interest, taxes, insurance, and dues. The interest-only period runs 120 months on 30- and 40-year terms, with a 75% maximum, and the cash-out ladder still applies.
One caution. DSCR is not cash flow. It compares rent to the payment and ignores repairs, vacancy, and management. Model those separately before you decide how much cash to take.
What About Short-Term Rental Use on the ADU?
Short-term rental income can qualify, but it is held to a stricter standard. Coverage must be 1.00 or higher, and loan amounts stop at $2,000,000. On a refinance, income comes from twelve months of operating history, counted at 80% of gross. These files are for experienced investors, meaning twelve months owning income property in the last thirty-six.
Permission is documented per property. 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. A permitted ADU in a building that bans short stays is a long-term rental for underwriting purposes.
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.
The Agency Contrast (and Why It Does Not Apply)
Freddie Mac’s ADU fact sheet allows one ADU on one- to three-unit homes. It caps ADU rental income at 30% of qualifying income and counts lease-documented ADU rent at 75% of the lease. It also says income from an illegal ADU may not be used to qualify.
Those caps apply to owner-occupied agency loans. A DSCR loan is a different animal. The permit principle carries over, but the percentages do not.
Can You Live in the Property?
Not on this loan. 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. If you live in the main house or the ADU, you need a different product. Many investors on this ladder hold title in an LLC, subject to lender program eligibility, with no layered entities. Entity papers and guarantor details deserve attention early.
How to Apply, Step by Step
Order matters here. Do the easy checks first, so a surprise does not surface after the appraisal.
1. Confirm the ADU’s legal status. Pull the permit, final inspection, and certificate of occupancy. If a record is missing, fix it before you apply.
2. Size the loan. Estimate value, pick a target loan, and read your band. Cash-out only exists at or below $3,000,000.
3. Test the coverage. Divide expected rent by the new PITIA. Run it with and without the ADU.
4. Assemble documents. Gather the lease, entity papers, insurance, the tax bill, the payoff statement, and title history. Recent purchases bring seasoning questions that vary by program, so ask early.
5. Order the appraisal with a rent schedule. Make sure the report captures the ADU’s rent, not just the main house. Above $2,000,000 two appraisals are required, and the values are reconciled.
6. Prove reserves from other funds. Typically six months of PITIA on the subject, twelve for a first-time investor. Cash-out proceeds never count.
7. Clear conditions. Expect follow-up requests, then a final review. Everything remains subject to lender guidelines.
Document checklist
- ADU permit and final sign-off
- Current lease or operating history
- Entity documents and guarantor ID
- Insurance and tax figures
- Payoff statement
- Reserve statements, excluding cash-out proceeds
Why Files Stall
A few problems repeat on ADU files. The permit trail is incomplete. The appraiser reports only the main house’s rent. Reserves were counted from the cash-out itself. The borrower asked for a balance one band too high. Credit sits just under the score the top cell needs. The first is often fixable before submission.
If the property looks like a paid-off asset with lots of equity, the same ladder applies. Only the payoff line changes.
What If Cash-Out Is Not Available at Your Size?
Three moves are common. Stage the borrowing by taking a smaller balance that lands in a friendlier band. Choose a rate-and-term refinance, which allows more leverage but releases no extra cash. Or place a smaller loan on a different property in the portfolio. Up to twenty financed properties are allowed.
| Option | Reviewed on | Watch for |
|---|---|---|
| DSCR cash-out | Property rent, plus credit | Band ceilings, proceeds caps |
| Full-documentation jumbo cash-out | Personal income and returns | Heavy documentation |
| HELOC or second lien | Varies by lender | Another payment behind the first loan |
Big banks often lean on full documentation for large cash-outs. That suits W-2 borrowers with clean returns. It suits self-employed investors with heavy write-offs less well.
Frequently Asked Questions
Does the ADU’s rent count toward coverage?
Usually, if the unit is legal and the program accepts how the income is documented. A lease or the appraiser’s market rent can support it. An unpermitted unit is generally excluded, and the main house may have to qualify alone.
What if my ADU is unpermitted?
Plan on it adding nothing to income and possibly nothing to value. Many owners legalize the unit first, then apply. Others apply on the main house alone, which only works if the coverage holds without the ADU.
Does cash-out count toward my reserves?
No. Reserves must come from other funds. The typical requirement is six months of PITIA on the subject property, or twelve for first-time investors. Cash-out never satisfies it.
Do I need tax returns or W-2s?
The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Credit, reserves, the appraisal, and property eligibility are still reviewed.
Can I take cash out on a loan above $3,000,000?
No. Above $3,000,000 the file is purchase or rate-and-term only, and above $4,000,000 every request is reviewed case by case. If you need cash, a smaller balance that sits in an earlier band is the usual route.
If you are buying or refinancing a high-balance rental property and want to see how the numbers work, Lendmire can help you compare super jumbo DSCR loan options based on the property income, the loan balance, credit profile, leverage, and investor goals. It arranges business-purpose financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. You can reach the team at 828-256-2183.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
2. BuildWithAPlan, ADU Appraisal
This article is part of Lendmire’s super jumbo DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get Approved for a Super Jumbo DSCR Cash-Out Refinance With a Low Appraisal? · Super Jumbo DSCR Cash-Out Refinance Requirements on a Paid-Off Property · Can You Get a Super Jumbo DSCR Cash-Out Refinance Through a Broker?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.