The Quick Read: This is a large-balance investor loan that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, and the accessory unit’s rent helps only when the unit is legal, documented, and supported by the appraisal. No single provider fits every file, because the right match depends on loan size, credit, leverage, and how the rent is documented. That is why Lendmire, a mortgage broker, compares programs across a wholesale network of lenders instead of naming one winner.
- Cash-out leverage falls as the loan grows, and there is no cash-out above a $3,000,000 loan.
- The accessory unit adds rent to the file but does not change the size bands that govern the loan.
- The unit’s rent counts only when it is permitted, rentable, and captured on the appraisal’s rent schedule.
- Two appraisals are typically required above $2,000,000, and reserves are typically six months on the subject property.
Key Terms Defined
Super jumbo: A label lenders use for very large loans. No agency regulates it, and lenders draw the line in different places.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation on the property, including principal, interest, taxes, insurance, and any HOA dues.
LTV (loan-to-value): The loan balance as a percentage of the appraised value.
ADU (accessory dwelling unit): A second, smaller living unit on the same lot as the main house, such as a garage apartment, a backyard cottage, or a finished basement unit with its own entrance.
Non-QM: A loan that falls outside the standard mortgage categories agencies buy. DSCR loans sit here because they qualify on the property’s income and not on personal tax returns.
Reserves: Liquid funds, counted in months of the property’s obligation, that you keep after closing.
Cash-out refinance: A new loan that pays off the old one and hands you the extra equity as cash.
What Does “Top Provider” Mean at This Loan Size?
It means the program whose rules fit your file. A ranked list of names cannot tell you that. At this size, lenders differ on leverage, credit overlays, appraisal rules, and how they count rent from a second unit.
Some context helps. Scotsman Guide reports that DSCR loans focus on property rental income, not personal income, and that a non-QM jumbo can reach $3 million or more. Across Lendmire’s wholesale network, the portfolio ladder runs from $150,000 to $10,000,000. The standard DSCR program stops at $3,000,000, and the extended ladder carries qualified investors past it.
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.
A broker’s value here is simple. One lender may cap cash-out lower than another. One may handle a non-warrantable condo and another may not. A broker that shops several wholesale lenders can match the file to the program that fits. The best program for your situation depends on property type, credit profile, leverage need, and documentation. Every file is underwritten individually, and nothing here is a commitment to lend.
How Does the Size Ladder Work?
Leverage steps down as the loan grows, and cash-out disappears above a $3,000,000 loan. The table shows the ceilings on an investment property at coverage of 1.00 or higher. Every figure is a ceiling 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 | 60% on review | 60% on review | — |
| $6M–$10M | 60% on review | 60% on review | — |
The bands are loan amounts, not purchase prices. Take your value, multiply by the leverage, and read the band for the resulting loan.
The top cell in each band needs a certain credit score. The $150,000–$1,000,000 band needs 660 or better for its top leverage. The $1,000,000–$1,500,000 band needs 700. The $1,500,000–$3,000,000 bands need 720. In the $3,000,000–$10,000,000 bands, the top cells need 700. Separately, the program floor is 660 on loans to $3,000,000 and 700 above that. A lower score takes a lower leverage cell inside the same band.
Cash-out has its own rules on proceeds. On a cash-out refinance, proceeds are unlimited at or below 60% LTV. Above 60% they are capped at $1,500,000. Borrowers with credit of 680 or lower get no cash-out above a $1,500,000 loan. Every request above $4,000,000 is reviewed case by case before submission, and only for purchase or rate-and-term. Every figure here varies by lender and program, so guidelines, property type, leverage, and credit profile all apply.
Interest-only terms also exist. A 120-month interest-only period is available on 30- and 40-year terms up to 75% LTV, qualified on the interest-only payment, subject to underwriting. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Reserves are typically six months of the payment on the subject property, and twelve for first-time investors. Cash-out proceeds do not count toward them.
How Does Underwriting Treat the ADU, Step by Step?
The loan is still tested on property-level rent against the full payment. The ADU adds a rent line only when the unit is legal and can be documented. Here is the sequence most programs in the network follow.
1. Loan size sets the program. The size decides which ladder row applies and whether cash-out is available at all.
2. The legality screen. The lender looks for a permit or certificate of occupancy and confirms the unit can be rented. Local rules decide what is permitted, and they differ by jurisdiction.
3. Classification. The property is read either as one unit with an ADU or as a two-unit income property. That choice drives the appraisal form. Fannie Mae’s Selling Guide names Form 1004 for one-unit properties, including ones with an ADU, Form 1025 for two- to four-unit properties, and Form 1007 as the rent schedule for one-unit investment properties. DSCR loans do not follow that guide’s rules. Appraisers simply use these forms as the industry’s common vocabulary.
4. Appraisal and rent schedule. The appraiser reports value and market rent. A rent schedule tied to the ADU is the usual way the unit’s income is captured.
5. Valuing the unit. Appraisers estimate an ADU’s value from comparable sales of homes with ADUs, not from build cost. A Portland-area appraisal study describes using Form 1025 with added rent schedules when the ADU is treated as a second unit. It also found that the contributory value varied widely. So an ADU may support a higher appraised value, depending on comps and underwriter review.
6. The coverage test. Rent is divided by the full monthly obligation. If the unit is finished but vacant, lenders lean on the appraiser’s market rent opinion. If it is leased, programs typically use the lesser of the lease rent and market rent.
7. Super jumbo overlays. Above $2,000,000, two appraisals are typically required. Above $3,000,000, the credit floor rises to 700, and rural property is excluded. Such loans also require a clean housing history and citizen or permanent resident status.
8. Entity and file items. Entity vesting is welcome, subject to program terms, but layered entities are not.
Coverage of exactly 1.00 earns full leverage. Coverage below 1.00 is a real path through select programs in the network, though LTV and terms adjust, subject to underwriting.
What Does the Coverage Test Look Like With and Without the ADU?
Run the numbers on a modeled property. Assume a $3,500,000 rental house with a permitted garage apartment, refinanced on a cash-out at 60% LTV. These inputs are modeled assumptions, not market data. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
- Main house only: Rent alone covers the full obligation at roughly 0.95x. That sits just under the 1.00 benchmark.
- Main house plus ADU: The appraiser’s rent schedule adds the garage unit’s market rent. Coverage moves to roughly 1.15x.
The ADU turns a borderline file into one that clears 1.00. The loan also lands above $2,000,000, so two appraisals apply. The score needed for the top cell in that band is 720.
Now flip it. Suppose the garage unit is unpermitted. The lender may exclude its income, and the main house must carry the file alone at about 0.95x. At that coverage, leverage and terms adjust, subject to underwriting, and cash-out proceeds may shrink. Some programs will not take the file at all.
Where Does the General Rule Break?
Several edge cases change the outcome, and each deserves a check before you apply.
An unpermitted or converted unit. Underwriters may give it no income and no value. Fixing the permit before you apply is usually cheaper than fighting the appraisal afterward. The Freddie Mac ADU fact sheet shows how seriously the agency world treats this. It says income from an illegal ADU may not be used to qualify. DSCR is not an agency product, and the agency’s 75% lease haircut and 30% income cap do not apply to DSCR files. The contrast is useful, though, because it shows legal status matters everywhere.
An ADU nearly as large as the main house. The appraiser may treat it as a second unit, which shifts the file toward Form 1025 and a two-unit read. A property with one to four units is eligible under the network’s programs.
A planned or half-built ADU. Unfinished space adds no rent. Once the unit is finished and leased, the file looks very different.
A short-term rental ADU. Short-term-rental files require coverage of 1.00 or higher, loans to $2,000,000, and an experienced investor (twelve months owning income property in the last thirty-six). Income is typically twelve months of operating history on a refinance, counted at 80% of gross. 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.
An owner-occupied unit. These loans are business-purpose. A house where you live in one unit and rent the other does not fit until the property is a documented rental.
Acreage and rural collateral. Up to twenty acres is allowed on loans to $3,000,000. Above $3,000,000, rural property is excluded, and a non-rural property can have no more than ten acres.
A loan above the cash-out ceiling. A $3,000,000 loan is the limit. If your target loan is larger, the realistic path is a payoff-only refinance.
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.
How Should You Compare Providers on This File?
Compare by file fit, not by brand. Ask each provider, or your broker on your behalf, the same questions.
| Question | Why it matters |
|---|---|
| What is the cash-out cap at my loan size? | Proceeds shrink above 60% LTV |
| How is ADU rent captured? | Rent schedule versus lease rent |
| Is my credit score in the top cell? | Lower scores drop to lower leverage |
| Are two appraisals required? | Typical above $2,000,000 |
| Do reserves exclude cash-out proceeds? | It changes how much cash you need |
| Is my entity structure accepted? | Layered entities are not |
A broker shops the same file to several wholesale lenders and sees where the rules diverge. That matters most on a property with an ADU, because lender treatment of second-unit income is where programs differ.
Prepare the paperwork before you ask. A typical ADU file includes:
- The permit and certificate of occupancy for the unit.
- Current leases, if the unit is rented.
- The entity documents, if the property is held in an LLC, subject to program terms.
- Proof of reserves, kept separate from cash-out proceeds.
- The insurance declaration page and the current mortgage statement.
- Short-term-rental operating history and a local permission record, if that is the rental use.
When Should You Choose Something Else?
Choose something else when the loan sits above the cash-out ceiling, or when the ADU income does not clear the test. A payoff-only refinance fits the first case. A smaller cash-out fits the second.
Personal-income routes are another option. They test your debt-to-income, not the property’s rent, so they suit borrowers whose income is strong but whose property coverage is thin. The reverse is also true. For the broader picture, see the complete DSCR loans guide.
Some people assume non-QM means weak credit. Scotsman Guide reports that recent non-QM loans averaged a 776 FICO and 75% LTV. Those are market-wide averages. The network figures that apply to your file are the ladder above: 660 at the floor on loans to $3,000,000, and 700 above. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Frequently Asked Questions
Does ADU rent count toward DSCR coverage?
Often, but only when the unit is legal, rentable, and supported by the appraisal’s rent schedule. A leased unit typically uses the lesser of the lease rent and market rent. An unpermitted unit is generally excluded, so the main house may have to qualify alone.
Is there a maximum cash-out on a super jumbo DSCR loan?
Yes. Cash-out proceeds are unlimited at or below 60% LTV and capped at $1,500,000 above 60%. There is no cash-out above a $3,000,000 loan. Borrowers with credit of 680 or lower get none above a $1,500,000 loan. All figures are subject to underwriting. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Does the ADU change how many appraisals I need?
Not directly. Two appraisals are typically required above $2,000,000, whether or not the property has an ADU. The ADU affects which form the appraiser uses and how rent is reported, depending on whether it reads as one unit with an ADU or as a second unit.
Can I use a short-term rental ADU?
Possibly. Short-term-rental files need coverage of 1.00 or higher, a loan of $2,000,000 or less, and an experienced investor. Income is counted at 80% of gross, based on documented operating history on a refinance. Municipal permission must be documented for the specific property.
What if my coverage is below 1.00?
Select programs in the network review coverage below 1.00, but LTV and terms adjust, subject to underwriting. Adding documented ADU rent, lowering the loan amount, or using the interest-only option can move the number.
Next Step
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. Call 828-256-2183 or request a quote. Lendmire arranges financing in 41 markets, including Washington, D.C., through select lenders in its wholesale network. Nothing here is a commitment to lend.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s super jumbo DSCR loan programs page.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
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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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. Scotsman Guide: One Out of 20 Mortgages Are Non-QM
3. Brown and Watkins: Appraising Properties With ADUs
5. Scotsman Guide: Which Groups Are Driving Non-QM Lending
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: Super Jumbo DSCR Cash-Out Refinance vs Portfolio DSCR Loan on a Paid-Off Property · Top Super Jumbo DSCR Cash-Out Refinance Providers to Finish a BRRRR Deal · Top Super Jumbo DSCR Cash-Out Refinance Providers to Pay Off a Second Mortgage
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.