The Quick Read: Expect to bring more equity than a standard DSCR purchase, because the no-ratio path through select lenders in Lendmire’s network tops out at 75% LTV on a purchase, which means roughly 25% down or more, subject to lender guidelines.
- Purchase leverage on the no-ratio path: up to 75% LTV. Rate-term refinance: up to 70%. Cash-out: up to 65%.
- A minimum credit score of 640 applies on this path, and vacant properties and first-time homebuyers are not eligible.
- No-ratio is available only through select lenders, generally for borrowers who already own a primary residence.
- Qualification rests on credit and equity rather than a rent-coverage calculation, so equity does the work the ratio normally does.
- Down payment is only part of the cash needed. Closing costs and reserves sit on top.
What “No-Ratio” Means Here
The term gets used two ways in the market. Some lenders use it for a loan that ignores property cash flow entirely. Others use it for a loan that accepts coverage below the usual floor. This article uses the first meaning: no coverage ratio is computed, and the file is judged on the borrower’s credit and the equity in the deal.
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That is different from a standard DSCR loan. Most DSCR programs divide monthly rent by the full monthly obligation (principal, interest, taxes, insurance, and any dues). Some select programs start at 1.00 coverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. The no-ratio path is its own thing again. With no ratio to lean on, the lender has one main cushion left: your equity.
Think of it as a trade. You give up the rent test, and the lender asks for more skin in the game and a cleaner credit profile.
The Direct Number: Down Payment Is the Mirror of LTV
No regulator sets a down payment for this loan. Investor loans on rental buildings are business-purpose credit, and they are reviewed differently from a standard owner-occupied mortgage. As the Federal Register notice on the ability-to-repay rule explains, business-purpose loans fall outside those consumer provisions. So leverage is set by lender appetite, not by statute.
On the no-ratio path in the network, the ceilings are:
| Transaction | Max LTV | Equity needed |
|---|---|---|
| Purchase | 75% | 25% or more |
| Rate-term refinance | 70% | 30% or more |
| Cash-out refinance | 65% | 35% or more |
These are ceilings, not promises. Pricing, property, and credit can pull a file below them. Eligibility is subject to lender guidelines and credit approval. This is not a commitment to lend.
Compare that to the standard DSCR purchase. Most files there land at 75%-80% LTV, which is 20%-25% down. So the no-ratio path asks for at least as much equity as the standard route, and usually a bit more.
Why 5+ Units Change the Picture
Five units and up is where residential-style rules thin out. Agency appraisal forms show the line. Fannie Mae’s Selling Guide scopes the small income property report (Form 1025) to 2-4 unit properties. A five-unit building sits outside it. Expect an appraisal built on the income approach, with a rent roll and operating figures behind it.
That matters for the down payment in three ways:
1. The appraised value drives the LTV, so a thin income approach can pull value down and raise the cash you need.
2. Lenders in the network treat larger buildings with more care on leverage, which is why the headline LTV is a ceiling and not a starting point.
3. Some 5+ unit programs want prior investing experience. Check that before you assume the headline LTV applies to you.
If you want the full mechanics of this loan type, Lendmire’s complete DSCR loans guide covers the structure end to end.
How the Math Runs on a Purchase
Take a five-unit building at a $1,000,000 price (a modeled assumption, not a market figure). At 75% LTV, the equity requirement is 25% of price. At 70% LTV on a weaker file, it is 30%. The calculator on this site can convert those percentages to dollars as an illustrative estimate. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
The loan is capped by the lowest of three things: the program’s max LTV, the LTV allowed for your credit tier, and the appraised value. Down payment is purchase price minus the loan. Closing costs and reserves are extra.
Here is where files go wrong. An investor budgets 25% down and nothing else. Then the appraisal comes in light, the LTV applies to the lower value, and the gap lands on the borrower. Budget a cushion above the headline equity. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Cash Beyond the Down Payment
The down payment is not the whole check. Plan for:
- Closing costs. Title, appraisal, entity and legal fees.
- Reserves. They vary by lender, leverage, loan size, and transaction type. Commonly about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Conservative rate-term files at modest leverage under that size can see reserves waived.
- Documentation. A rent roll, leases, operating statements, and entity documents are the usual asks on a 5+ unit file.
Reserves need documentation too. Bank statements showing the down payment and the reserve balance, both seasoned and sourced, prevent most of the preventable pends.
Where the Down Payment Can Come From
Your own capital. That is the clean answer. Most DSCR lenders want the borrower’s money in the deal. A second lien taken at closing to fund the down payment is generally a problem, and so are non-arm’s-length deals and borrowed down payments. Gift funds are not something to assume. Ask before you structure around them.
Document the source. Large deposits without a paper trail can draw questions about a down payment.
Credit Still Matters, Maybe More
On this path the minimum credit score is 640. That is a floor, not a target. Across the network, most standard programs want around 660, and 700+ unlocks the strongest leverage tiers. With no coverage ratio in the file, credit carries more weight, so a score near the minimum usually means less leverage, not the full 75%.
Also know what is excluded. Vacant properties, first-time homebuyers, and files with one or no credit score are not eligible on this path. Because the path is generally for borrowers who already own a primary residence, a first-time buyer is out regardless of down payment.
Property type matters as well. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs.
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.
No-Ratio vs. Standard DSCR vs. Sub-1.00
These are three different paths. Mixing them up is how borrowers end up with the wrong expectation on equity.
| Factor | Standard DSCR | Sub-1.00 coverage | No-ratio |
|---|---|---|---|
| Rent test | Rent vs. PITIA | Rent vs. PITIA, lower result | No ratio computed |
| Purchase LTV | Typically 75%-80% | Adjusted down | Up to 75% |
| Availability | Broad | Select lenders | Select lenders |
| Main cushion | Rental coverage | Equity and terms | Credit and equity |
A larger down payment lowers the monthly obligation, which can lift a ratio on a standard file. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
One caution on the word “coverage.” Clearing 1.00 is not positive cash flow. The calculation compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it. On a 5+ unit building those costs are large, so size your equity with them in mind. Lendmire’s piece on how much you can borrow on a DSCR loan for multifamily 5+ properties walks through the loan-size side.
Refinance and Cash-Out on a 5+ Unit Building
On a refinance, the equity test flips. You are not putting cash down. You are leaving equity in. At 70% LTV on a rate-term refinance, 30% of value stays in the building. At 65% on a cash-out, 35% stays. Cash-out files typically also expect seasoning on a recent purchase, commonly about 6 months across the network, documented by the settlement statement.
For a BRRRR-style plan, the appraised value after the work sets the number. A higher value may be supported depending on comps and underwriter review, but never assume it. Plan the refinance on a conservative value.
Common Mistakes on These Files
- Reading no-ratio as no down payment. It does not mean that. The path is built around equity.
- Assuming 75% is the starting point. It is the ceiling.
- Ignoring reserves. They are separate from the down payment and need their own documentation.
- Using the wrong product name with the wrong loan. Sub-1.00 and no-ratio are separate paths with separate envelopes.
- Trusting the pro forma. The lender’s view of income and value can differ from the seller’s.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Key Terms Defined
- LTV (loan-to-value): the loan amount divided by the property’s appraised value or price, whichever the lender uses.
- PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation.
- Reserves: liquid funds held after closing, counted in months of PITIA.
- Seasoning: the minimum time you must hold a property before a cash-out refinance.
- No-ratio: a path where no rent-coverage ratio is computed and the file rests on credit and equity.
A Quick Fit Check
Run through these before you submit:
1. Do you already own a primary residence? 2. Is your credit score at or above 640, ideally higher? 3. Is the building occupied, not vacant? 4. Can you cover 25% or more of price, plus closing costs and reserves, from your own documented funds? 5. Is the property a type the network offers?
If all five are yes, the structure is worth running. If not, a standard DSCR path may fit better.
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.
Frequently Asked Questions
Is 25% down the minimum on a no-ratio 5+ unit loan?
It is the floor on a purchase at the 75% LTV ceiling. Many files land above it once credit, appraisal, and property are reviewed. Treat 25% as the best case, not the plan. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Does no-ratio mean I can skip the rent roll?
No. Even with no coverage ratio computed, a 5+ unit file still needs a rent roll, leases, operating statements, and entity documents. Those support the appraisal and the lender’s review of the property.
Can I use a second loan or borrowed money for the down payment?
Generally not. Most DSCR lenders want your own capital in the deal, and a second lien at closing to fund the down payment is typically a problem. Ask before structuring around it.
How much do I need in reserves on top of the down payment?
It varies by lender, leverage, loan size, and transaction type. About 6 months of PITIA is common, with about 9 months above $1,500,000. Some conservative rate-term files under that size see reserves waived.
What is the equity requirement on a refinance?
On the no-ratio path, rate-term refinances go to 70% LTV and cash-outs to 65%. That means 30% and 35% of value stays in the property, subject to lender guidelines and appraisal.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork, a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Federal Register: Ability-to-Repay and Qualified Mortgage Standards
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much an IO ARM Payment Shifts vs. a Fixed DSCR Loan · Can a Luxury STR Operator Get a DSCR Loan Below a 1.0 Ratio? · How to Document a Jumbo DSCR Loan
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.