The Quick Read: An LOMA removes the federal flood insurance purchase requirement, but it does not automatically remove the lender’s own requirement, so the flood premium leaves the payment only when the lender drops the requirement in writing. Until then, the premium stays in PITIA and pulls the coverage ratio down.
- Required flood premium sits in the PITIA denominator, so every dollar of it lowers the ratio.
- A LOMA only works if the lender accepts it and reissues its flood determination.
- Three outcomes are possible: the premium stays in, drops out, or is recalculated at a lower amount.
- Timing matters most: a LOMA in hand before underwriting is cleaner than one pending at closing.
- Cancelling the existing policy before the lender confirms in writing is an avoidable mistake.
DSCR loans are business-purpose loans on non-owner-occupied rentals. They are reviewed on the property’s rent against its payment, not on a personal income stack. That is why a flood line item matters so much here. It is a direct subtraction from the number the whole file rests on.
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How Does a DSCR Lender Count Flood Insurance in the First Place?
The flood premium is part of PITIA when the lender requires coverage. DSCR is eligible rent divided by principal, interest, taxes, insurance and any HOA dues.
Across the wholesale network, the pattern is consistent. The lender orders a flood determination on the collateral. If the structure sits in a Special Flood Hazard Area (SFHA), flood coverage is required and the premium is counted. If it does not, no flood premium is counted unless the lender’s own overlay asks for coverage anyway.
Most select programs start at a 1.00 coverage floor. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Either way, a flood premium that was not in the first estimate can move a file from passing to failing. Picture a duplex that clears with a comfortable margin on a quote with no flood line. Add a required flood policy and the same rent now covers a larger denominator. The coverage ratio drops, sometimes below the program floor.
Clearing 1.00 also does not mean the property cash flows. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capex sit outside the calculation.
What Does a LOMA Actually Change?
An LOMA changes the federal mandate and nothing else by itself. FEMA’s LOMA and LOMR-F page explains that the agency created these processes to correct how some properties appear on the flood map. An owner submits mapping and survey data, including elevation data certified by a licensed land surveyor or registered professional engineer, asking FEMA to remove the property or structure from the SFHA.
The same page states the key point for investors. An LOMA or LOMR-F eliminates the federal flood insurance purchase requirement for federal or federally backed financing. A lender can still require flood insurance as a condition of the loan, wherever the structure sits.
DSCR loans are not federally backed. So the federal mandate was never the thing doing the work on most DSCR files. The lender’s own flood policy does the work. An LOMA is strong evidence, but it is evidence the lender must choose to act on.
That is why a lender may keep a coverage requirement even after the map says the structure is out.
Key Terms Defined
LOMA (Letter of Map Amendment): An FEMA letter stating that a specific property or structure sits above the base flood elevation and is not in the SFHA, despite how the map shows it.
LOMR-F (Letter of Map Revision based on Fill): An FEMA letter that removes a property from the SFHA because fill raised the ground or structure above the base flood elevation.
CLOMA (Conditional LOMA): A conditional review of a proposed structure. It does not amend the effective flood map, so it is not a removal of the requirement.
SFHA (Special Flood Hazard Area): The mapped high-risk flood area where flood insurance is required for regulated or federally backed financing.
Flood determination (SFHDF): The lender’s vendor-run finding, often on the Standard Flood Hazard Determination Form, of whether the collateral building sits in a SFHA.
PITIA: Principal, interest, taxes, insurance and association dues. The denominator in the DSCR calculation.
What Is the Step-by-Step Treatment on a DSCR File?
The sequence below shows where the premium enters and where it can leave.
1. Flood determination. The lender or its vendor runs a determination. The Interagency Q&A on flood insurance hosted by the Federal Reserve covers the SFHDF and how lenders use it to decide whether the collateral building is in an SFHA. A lender may share the determination with the borrower, and under FEMA’s Letter of Determination Review process the lender must make it available.
2. Default treatment. If coverage is required, the premium goes into PITIA. The ratio is calculated on that full denominator.
3. Borrower obtains a LOMA. The packet usually includes an application, a deed or legal description, and elevation data from a licensed surveyor or engineer. The surveyor requirement is the part that takes planning.
4. Lender accepts the LOMA and revises the determination. This is the decision point. The LOMA has to be in the lender’s hands, and the lender has to act on it. A letter sitting in the borrower’s email changes nothing in the file.
5. Premium comes out only if the lender drops the requirement. If the lender waives flood, the premium leaves the denominator and the ratio rises. If the lender keeps a requirement under its own overlay, the premium stays in, often at a lower amount than an SFHA rate but still counted. Which of these happens is a lender-guideline question, and it varies across the network.
6. Cancelling the existing policy. FEMA’s guide to requesting an LOMA or LOMR-F says the owner may be entitled to a refund for the current policy year if FEMA issues the letter and the lender agrees to waive the requirement. The owner submits the LOMA and the lender’s waiver through the insurance agent. Under 44 CFR 62.5, a policyholder can cancel when a lender no longer requires coverage. The refund is pro rata for the current term only, with no refund of fees or surcharges.
What decides the outcome comes down to five things: which FEMA document you hold, whether the lender accepts it, whether the lender keeps its own overlay, whether the LOMA arrives before underwriting, and whether the policy is already bound.
What Do the Three Outcomes Look Like in the Coverage Ratio?
The same property produces three different numbers depending on what the lender does. This table uses ratios only, as a modeled illustration.
| Scenario | Flood line in PITIA | Coverage ratio direction |
|---|---|---|
| Before LOMA, SFHA required | Full premium | Lowest |
| LOMA accepted, requirement dropped | None | Highest |
| LOMA accepted, coverage still required | Lower premium | In between |
Say a duplex sits at roughly 1.10x with no flood line. With a required SFHA policy it might slip toward 1.00x or under. With the LOMA accepted and the premium dropped, it returns to the 1.10x range. With a lender that keeps a lower-cost policy, it lands between the two. The point is the sequence, not the figures. A file that is tight at the program floor can pass or fail on this one line.
If the number falls below 1.00x, there are paths. A select-lender route takes coverage below 1.00x in the network, with leverage and terms adjusted. Other structures, such as interest-only periods through select lenders, may change the payment side of the ratio. Each is reviewed subject to lender guidelines, credit approval and property review. A larger down payment can also lower the payment and lift the ratio, though it never erases leverage caps, credit floors, reserve rules or property eligibility.
Where Does the General Rule Break?
Several edge cases change the answer.
LOMR-F. FEMA treats a fill-based revision like an LOMA for the federal purchase requirement. It also needs elevation certified by a surveyor or engineer. The lender’s discretion still applies.
CLOMA is not a LOMA. A conditional letter reviews a proposed structure and does not amend the effective map. It matters on new construction and heavy rehab, but it does not remove the requirement.
LOMR is a different document. An LOMR is a formal map revision that can adjust base flood elevations and floodway boundaries. Different document, different effect.
“Out as shown” discrepancies. Some determination vendors flag a property if any part of the lot sits in the SFHA, even when the structure is well outside it. A municipal FEMA “out as shown” instruction sheet describes the practical order: contact the lender first, ask what documentation the determination used, and then apply for an LOMA “out as shown” if the lender still wants an FEMA letter. The Interagency Q&A also has a flood zone discrepancies section that applies when the lender’s determination and the borrower’s information disagree.
Condos. Condo buildings can carry a master flood policy. How an LOMA interacts with that policy, and with the HOA questionnaire and condo certification, is a lender-specific question. Describe it to the lender as its own item rather than assuming the single-property path applies.
Private flood. Whether a private policy satisfies the lender is a lender call. Confirm acceptance before binding anything.
Ineligible property types. Manufactured homes, log homes and barndominiums are not offered in the network’s DSCR programs, so an LOMA is irrelevant to them.
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.
What Does the Investor Decision Look Like in Practice?
Pursue an LOMA early if the structure sits above the base flood elevation and the premium is large enough to move the ratio. The decisive question is not whether FEMA will issue the letter. It is whether the lender will drop its requirement once it has the letter. Ask that before paying a surveyor.
Practical habits that keep these files clean:
- Ask which flood data the lender uses, and get the lender’s flood policy requirements in writing.
- Get the flood quote before the file goes in, not after. Coverage ratios that pencil without the line often do not with it.
- Ask whether rental-loss coverage is also required. That is a common lender ask on the insurance side.
- Do not cancel a bound policy until the lender confirms in writing that it no longer requires coverage.
- Keep the LOMA, the revised determination and the written waiver together in the file.
On purchases, the LOMA timing splits three ways. Pre-contract is cleanest, because the determination is revised before underwriting builds the ratio. Under contract is workable if the lender will wait on the letter, though the premium stays in the number until it arrives. Post-closing is the weakest. You carry the premium through the file, and any later refund is governed by the cancellation rules above. On refinances, the same logic applies to the existing policy, and an already-bound flood policy adds the cancellation step.
Here is the catch. Flood exposure that surfaces late, after appraisal or insurance review, is what derails files. An LOMA pursued after the problem appears usually costs the file its position. For the broader program picture, the complete DSCR loans guide covers the full set of structures.
One more point on program terms. Typical purchase leverage runs 75%–80% on an investment property, and cash-out tops out around 75%. Credit tiers commonly start around 620, with most programs wanting about 660 and 700 or higher for the strongest leverage. Reserves are commonly around 6 months of PITIA and step up to about 9 months on larger balances. These are guidance ranges, subject to lender guidelines, and not a commitment to lend. A lower flood-adjusted payment helps the ratio. It does not change any of these other tests.
What Mistakes Come Up Most?
Assuming the LOMA is automatic. It removes the federal mandate only. The lender keeps its discretion.
Treating a DSCR loan as exempt from flood rules. The loan is not federally backed, but a flood zone still means a flood requirement under the lender’s policy.
Relying on a listing-site flood zone. The lender’s ordered determination is what counts, and it can differ from what a listing or quote showed.
Cancelling early. Refunds depend on timing and policy rules, and the pro-rata limit under federal rules means an early cancellation can leave money on the table or leave you uninsured.
Treating Zone X as no risk. FEMA’s figure that more than 25 percent of claims come from outside the SFHA is the reason lenders keep overlays.
Skipping the LLC paperwork. When an entity owns the property, the policy must name the right insured and mortgagee, subject to lender program eligibility. A wrong name on the binder pends the file.
Frequently Asked Questions
Does an LOMA remove the flood insurance requirement on a DSCR loan?
Not by itself. An LOMA ends the federal purchase requirement for federally backed financing, and a DSCR loan is not federally backed. The lender’s own policy decides, so the requirement ends only when the lender accepts the LOMA and drops it in writing.
Does the flood premium count in the DSCR calculation?
Yes, when the lender requires coverage. The premium goes into the insurance portion of PITIA, which lowers the ratio. If the lender waives the requirement after an LOMA, the premium leaves the denominator and the ratio rises. If the lender keeps a requirement, a lower premium may still be counted.
Should I cancel my flood policy once FEMA issues the LOMA?
Wait for the lender’s written confirmation first. A refund for the current policy year is possible when the lender agrees to waive, and federal cancellation rules provide a pro-rata refund for the current term only, with no refund of fees or surcharges.
What if the LOMA is still pending when the file goes to underwriting?
The premium generally stays in the ratio until the lender revises its determination. Keep the policy in force, run the coverage number with the premium included, and treat any later drop as an improvement rather than a given.
Is an LOMR-F or CLOMA treated the same as an LOMA?
An LOMR-F is treated like an LOMA for the federal requirement and needs surveyor- or engineer-certified elevation. A CLOMA reviews a proposed structure and does not amend the effective map, so it does not remove the requirement.
Next Steps
Tax treatment varies; consult a qualified professional. 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 DSCR investor loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. Request a quote or call 828-256-2183.
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. Federal Reserve – Interagency Q&A on Flood Insurance
3. 44 CFR 62.5
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 a Rental Insurance Increase Moves the DSCR Ratio · How a DSCR Lender Counts Airbnb Income From a Garage Conversion · How an Insurance Increase on an Older Roof Moves DSCR
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
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.