The Quick Read: On the super jumbo programs Lendmire places files with, the reserve requirement does not step up by purchase or refinance. It is a flat count of months on the subject property, and what changes between the two paths is leverage, the cash-out ceiling, and where the reserve money can come from. Every figure below is a ceiling through select wholesale programs and is subject to underwriting. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
- Reserves are typically 6 months of PITIA on the subject property, or 12 months for first-time investors. Interest-only files count ITIA instead.
- The tiers that move with loan size are leverage, credit score, and appraisal count, not the reserve month count.
- Cash-out proceeds should not be counted toward reserves. Plan to hold reserves outside the transaction.
- A purchase carries more leverage than a cash-out at every size above $1,000,000, and cash-out stops above $3,000,000.
Most investors searching this topic expect a reserve ladder, with three months at one size, six at the next, and nine above that. Some lenders in the wider market do scale reserves with balance. The wholesale programs behind this ladder keep the reserve count flat and put the pressure elsewhere. Knowing that saves a lot of rework on a large file.
The Honest Answer: Who Each Path Is For
A purchase suits an investor who has the cash already sitting in liquid accounts and wants the highest leverage the size band allows. A cash-out suits an investor with equity in a stabilized rental who wants to redeploy it, and who accepts a lower leverage ceiling and a hard stop at $3,000,000.
Reserves are the one line where the two paths look the same on paper and behave differently in practice. The month count is identical. The difference is the cash-out check. It cannot be the thing that satisfies the reserve requirement, so a refinance borrower who plans to use the proceeds as the cushion has built the file on money that does not count. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Side-by-Side
| Factor | Purchase | Cash-Out Refinance |
|---|---|---|
| Review basis | Property rent vs. full payment | Property rent vs. the new, larger payment |
| Reserve months | Typically 6; 12 first-time investors | Typically 6; 12 first-time investors |
| Reserve source | Own funds, sourced and seasoned | Own funds; proceeds not counted |
| Top leverage band | 80% to $1,000,000 | 75% to $1,000,000 |
| Leverage above $2,000,000 | 75% to $3,000,000 | 60% to $3,000,000 |
| Above $3,000,000 | 65% to $4,000,000; 60% above, on review | Not available |
| Cash-out proceeds | Not applicable | Unlimited at 60% LTV or below; capped above that |
| Appraisals above $2,000,000 | Two | Two |
| Entity vesting | Accepted; no layered entities | Accepted; no layered entities |
| Documentation focus | Down payment, reserves, entity papers, lease or appraisal rent | Payoff, reserves, entity papers, current lease or operating history |
The reserve row does not change between columns. That is intentional. This is where many files go sideways, because borrowers assume a bigger loan or a refinance changes the count.
How the Reserve Number Is Built
Reserves are measured in months of the full monthly obligation on the subject property: principal, interest, taxes, insurance, and any HOA dues. On an interest-only loan, the base drops the principal piece, so the obligation is interest, taxes, and insurance. The interest-only period on these programs runs 120 months on 30- and 40-year terms, up to 75% LTV, with coverage of 0.75 or better, qualified on ITIA. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Multiply that obligation by six, or by twelve for a first-time investor, and that is the liquid balance the file needs after the down payment and closing costs are covered. The reserve money cannot also be the down payment. The same dollars do not count twice.
Across the wholesale network, the programs at this size do not add reserves for each additional financed property. An investor can hold up to 20 financed properties, and the subject-property count stays the same. Some lenders in the market stack reserves per property, so a file that was built for that overlay may find it carries more cushion than this program needs.
Assets matter too. Cash in checking and savings is the cleanest. Brokerage and retirement balances can count at a discount, and an underwriter will ask for statements that show the funds are the borrower’s own and have been there. Bank statements on a DSCR file prove reserves and source of funds. They do not prove income, because the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
Where the Tiers Actually Move
Here is the real ladder. Size changes leverage, credit, and appraisal rules. It does not change the reserve month count.
| Loan size | Purchase LTV | Cash-out LTV | Credit floor |
|---|---|---|---|
| $150K to $1M | 80% | 75% | 660 |
| $1M to $1.5M | 75% | Steps down | 700 |
| $1.5M to $3M | 75% | 60% | 720 |
| $3M to $4M | 65% | Not available | 700 |
| $4M to $10M | 60%, on review | Not available | 700 |
Those leverage figures assume coverage of 1.00 or higher and are ceilings, not promises. Above $4,000,000, every request is reviewed case by case before submission, and the path is purchase or rate-and-term only. Above $3,000,000 there are extra overlays: a 700 credit floor, 0x30x24 housing history, 48-month event seasoning, U.S. citizens and permanent residents only, no rural property, a ten-acre maximum, and cash-out never satisfying reserves.
A reserve count that stays at six months gets heavier as the loan grows, because it is six months of a bigger obligation. So the reserve dollars rise with size even though the month count stays flat. That is the part investors tend to underplay. A $4,000,000 file at six months is a very different liquidity ask than a $900,000 file at six months.
Coverage matters here as well. At 1.00 or higher, a file earns full leverage for its size band. Coverage from 0.75 to 0.99 is a real select-program path to $2,000,000, with LTV and terms adjusted, subject to underwriting. No-ratio files reach $2,000,000 through a handful of lenders in the network, and they require a seven-year clean housing history and 0x30x24, within an envelope of LTV, credit, and reserves, subject to underwriting.
Can Cash-Out Proceeds Count as Reserves?
No, and the safe assumption is to never plan on it. Some lenders in the market do let proceeds count toward reserves under conditions. That varies by lender and by tier. On the programs the network uses for super jumbo balances, the planning assumption is that cash-out does not satisfy reserves. Build the file with reserves already sitting in an account, seasoned and sourced, before the refinance is submitted.
This matters for a recycling strategy. An investor pulling equity to buy the next rental has two jobs for the same check: the next down payment and the reserves on the new loan. Proceeds can fund the down payment. They cannot also serve as the reserve cushion on the file that produced them. Keep a separate liquid balance, or the file will come back for more documentation.
For tier planning, the order of operations is simple. Size the cash-out against the leverage ladder. Confirm the new payment still clears the coverage requirement, since coverage is tested on the larger payment. Then set aside the reserve months separately.
When a Purchase Is the Better Fit
A purchase fits when the investor wants maximum leverage and already holds the liquidity.
- Balance above $3,000,000. Cash-out is not available there, and a purchase or rate-and-term refinance is the only way to a file at this size. Leverage tops out at 65% to $4,000,000, and at 60% on review above that.
- Leverage matters more than liquidity. On a purchase, the 80% band up to $1,000,000 is higher than the 75% cash-out band at the same size. Between $1,500,000 and $3,000,000, a purchase reaches 75% where a cash-out reaches 60%.
- The reserve money is already in the right account. A purchase borrower needs seasoned, sourced funds for the down payment and the reserve months. If the money is there, the file is straightforward.
- The property has no rent history yet. On a purchase, short-term-rental income can come from the appraisal’s rent analysis at 80% of gross. A refinance needs twelve months of operating history. Short-term-rental files require coverage of 1.00 or higher, and loans reach $2,000,000. They are for experienced investors only, meaning twelve months owning income property in the last thirty-six. Municipal permission to operate must be documented property by property, because the rules are set locally and change. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The catch is that a purchase pulls from outside liquidity. An investor who is cash-heavy but not equity-heavy fits this path. An investor who has equity locked in an existing rental may find the purchase asks for more liquid cash than the plan allows.
When a Cash-Out Is the Better Fit
A cash-out fits when the investor already owns the property, has meaningful equity, and wants to put it to work without selling.
- Equity is the asset, not cash. A cash-out converts equity to liquidity. Proceeds are unlimited at or below 60% LTV, with a $1,500,000 cap above 60%, and none are available above $3,000,000. Borrowers with 680 or lower credit do not get cash-out above $1,500,000.
- The balance is $3,000,000 or less. Inside that range, a refinance is a workable route, though leverage on a cash-out runs 75% on a standard rental up to $1,000,000 and steps down from there.
- Reserves are held elsewhere. The investor has the six months, or twelve as a first-time investor, in a separate account, so the cash-out check is free for the next deal.
- Coverage survives the larger payment. A cash-out that increases the loan lowers the coverage ratio. If rent was clearing at around 1.2x before, pulling equity can push the file toward 1.0x, and some files will fall below. A file below 1.00 may still have a path through select lenders, with LTV and terms adjusted, subject to underwriting. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The risk is a refinance that grows through appreciation or a larger payoff and lands in a tighter band than the original purchase. Leverage and credit rules shift at each size boundary, so a loan that crosses $1,500,000 or $2,000,000 can pick up a higher credit floor and, above $2,000,000, a second appraisal. Check the target loan size against the table before ordering the appraisal, not after.
What Else Changes at Super Jumbo Size
- Second appraisal. Above $2,000,000, two appraisals apply on both paths.
- Property type. The program covers 1-4 units, warrantable condos, and non-warrantable condos to 75% and $1,500,000. Condotels reach 75% on a purchase and 65% on a refinance, to $1,500,000, with $250,000 cash-in-hand. Rural property on five acres or less reaches 75%, and larger acreage tapers by size.
- Entity vesting. LLC vesting is welcome, subject to program terms. Layered entities are not. Entity documents are one of the most common causes of a stalled file. Operating agreements, EIN letters, and the signing authority should be ready before submission.
- Business purpose. These are business-purpose loans on non-owner-occupied investment property. Regulation Z treats credit to acquire or maintain non-owner-occupied rental property as business purpose. The test is how the loan proceeds are used rather than the property type, as Compliance Alliance explains. A cash-out whose proceeds go to personal spending can be treated differently, so direct proceeds to business use.
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.
A Planning Checklist
1. Confirm the loan size band and its credit floor and leverage ceiling. 2. Decide whether the investor is a first-time investor, which moves reserves from six months to twelve. 3. Compute reserves on PITIA, or ITIA if the loan is interest-only, and keep that balance separate from the down payment. 4. For a cash-out, test coverage on the new payment, not the old one. 5. Keep reserve funds seasoned and in the borrower’s own name or a documented source. 6. Gather entity documents, lease or operating history, and the appraisal order for two appraisals if the loan is above $2,000,000. 7. For a short-term rental, document local permission for that specific property.
Mistakes to avoid: counting the cash-out check as reserves, counting the same dollars as both down payment and cushion, assuming reserves shrink on a larger loan, and assuming a refinance needs fewer documents than a purchase. DSCR lender review runs on property income, but assets, source of funds, entity papers, and the appraisal are all still required.
For a related look at how the same two paths compare on income documentation, see Lendmire’s piece Rate-and-Term vs Cash-Out on a Super Jumbo Bank Statement Refinance. For the interest-only side, Lendmire’s article on interest-only reset options on a super jumbo purchase versus a cash-out goes deeper. The complete DSCR loans guide covers the program basics.
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.
Key Terms Defined
Reserves: Liquid assets the borrower holds after closing, counted in months of the monthly obligation on the subject property.
PITIA: Principal, interest, taxes, insurance, and HOA dues, the full monthly obligation used to size reserves and coverage.
ITIA: The same obligation without principal, used on interest-only loans.
Reserve tier: A band of loan size where the requirements change. On these programs the leverage, credit, and appraisal rules change by band; the reserve month count does not.
Seasoning of funds: The period reserve money must sit in the borrower’s account so its source is clear.
Coverage ratio: Monthly rent divided by the full monthly obligation, the core DSCR test.
The Verdict
Treat reserves as a fixed liquidity ask that grows in dollars with the loan, and treat the leverage ladder as the thing that actually separates the two paths. A purchase gives more leverage and needs outside cash. A cash-out gives liquidity from equity and asks for a lower leverage ceiling, a stop at $3,000,000, and reserves held apart from the check. Neither is better in general. The right choice depends on where the investor’s capital is sitting today.
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. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Nothing here is a commitment to lend.
Frequently Asked Questions
Do reserves go up as the loan gets bigger?
The month count does not, but the dollars do. On these programs reserves are typically six months of PITIA on the subject property, so a larger obligation means a larger cushion. Terms are subject to underwriting.
Are reserves different for a cash-out than for a purchase?
The month count is the same on both paths. The difference is the source. Cash-out proceeds should not be counted toward reserves, so the cushion has to exist outside the transaction.
What changes for a first-time investor?
Reserves typically move from six months to twelve. The base is still the subject property’s obligation, with ITIA used on interest-only loans. Short-term-rental files add an experience requirement as well.
Do other financed properties add to the reserve requirement?
Not on the programs behind this ladder. Reserves are measured on the subject property, and an investor can hold up to 20 financed properties. Some lenders in the market stack reserves, so confirm the program before submission. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
What happens if my refinance crosses into a higher size band?
Leverage, the credit floor, and appraisal rules can change at the boundary. Above $2,000,000 two appraisals apply, and above $3,000,000 cash-out is unavailable. Check the target loan size against the ladder before ordering the appraisal.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
Self-employed borrowers can compare super jumbo program options on Lendmire’s self-employed mortgages page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
2. Compliance Alliance: Regulation Z and Investment Properties
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 Exposure Across LLCs for the Next Portfolio Cash-Out · Cross-Collateral Line vs Super Jumbo DSCR Cash-Out for LLC Investors · How to Cash Out Your Highest-Equity Luxury Rental on Super Jumbo DSCR
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.