The Quick Read: A Fannie Mae cash-out underwrites the borrower: personal income, debts, credit, and a count of financed properties. A DSCR cash-out qualifies primarily on property-level rental income covering the new payment, subject to lender guidelines. A landlord with paid-down rentals has the equity either way. The loan that works is the one whose constraint you clear first.
- Agency loans fit landlords with clean taxable income, few financed properties, and rentals titled in their own name.
- DSCR loans fit landlords whose tax returns show thin income after depreciation, who hold title in LLCs, or who are scaling a portfolio.
- Both are capped by leverage. Across most of Lendmire’s wholesale network, DSCR cash-out tops out around 75% LTV on an investment property.
- A bigger loan means a bigger payment, so the cash you pull lowers your coverage ratio.
- Agency rules here are published norms, shown for contrast only. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
The honest answer on who each is for: if your personal income documents well and you hold a handful of rentals in your own name, an agency cash-out is a legitimate route. If your income is built from write-offs, your rentals sit in entities, or you want to keep buying, the DSCR route usually fits better. Neither is a universal winner. This piece referees both.
DSCR Cash-Out Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 29, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Side-by-Side
The agency column reflects published industry norms, described with qualifiers. The DSCR column reflects how files typically run across the select lenders Lendmire’s wholesale network places with. Pricing is deliberately left out of both columns; the site calculator is where pricing and payment estimates live.
| Factor | Agency (FNMA) cash-out | DSCR cash-out |
|---|---|---|
| What is tested | Borrower income, debts, credit | Property rent vs. full payment |
| Income documents | Tax returns, rental worksheets | Leases, appraisal rent schedule |
| Rental income credit | Discounted share of gross rent | Rent vs. PITIA, per program |
| Title and entity | Natural person; LLC title moved out | LLC borrower often fits, per program |
| Financed-property count | Capped; reserves scale with count | Generally not the gating test |
| Seasoning | Title clock plus loan-age clock | About 6 months from title recording |
| Reserves | Added for other financed properties | Commonly around 6 months PITIA |
| Extra cost feature | None of note | Prepayment structures are common |
How Each Loan Reads the Same Landlord
An agency file begins with the borrower. Lenders build a rental income figure from Schedule E or from a lease or a rent schedule. In published mortgage-insurer training, the worksheet takes 75% of gross rent, with the remainder covering vacancy, maintenance, and management. The result then goes into a debt-to-income calculation alongside everything else you owe.
Here is the catch for a paid-down landlord. With no mortgage interest to offset, depreciation and expenses still shrink the net income on the tax return. A portfolio can be rich in equity and look thin on paper. The agency test reads the paper.
A DSCR file asks a different question. Rent is divided by PITIA, which is principal, interest, taxes, insurance, and any HOA dues. A ratio of 1.00 is where select programs start, not a standard, and stronger ratios open better leverage. Qualification is property-first, though credit and a guarantor still matter. Programs below 1.00 are available through select lenders in the network, with leverage and terms adjusted.
One more point that landlords confuse. Clearing 1.00 does not mean the property cash-flows. Repairs, vacancy, management, utilities, and capex sit outside the calculation.
The Agency Clocks and Rules
Fannie Mae’s Selling Guide allows an existing first mortgage to be paid off in a cash-out only if it is at least 12 months old. The capital markets notice says that age is measured from the note date of the existing loan to the note date of the new one. A separate title-ownership wait also applies, which published program announcements put at six months.
For a rental with no mortgage, there is no loan to age, so the title clock is the relevant one. A landlord who recently did a rate-and-term refinance on a rental restarts the loan-age clock. Plan around that.
Entity title is the other common snag. The same guide section says that LLC ownership has to be transferred out of the LLC into the individual borrower’s name to close. Time held in a borrower-controlled LLC can count toward ownership, but the deed still moves. Moving title can raise liability, insurance, and lender-consent questions, so talk it through before you act.
Property count matters too. Agency reserve requirements are published as a percentage of unpaid balances on other financed properties, and a cap on financed one-to-four-unit properties applies. Paid-off rentals help here, since only financed properties count. The catch: a cash-out puts a new mortgage on that rental, so it moves from the free column into the financed column. A landlord who cashes out three paid-off rentals under agency rules uses up capacity fast. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
On appraisal forms, the lender-side rent evidence is Form 1007 for single-family and Form 1025 for two-to-four unit properties, both named. DSCR files lean on the same forms. In a DSCR file the appraisal does double duty: it sets the value that drives LTV and the market rent that drives coverage.
When FNMA Cash-Out Is the Better Fit
Agency is the better fit in a narrow but real set of cases.
1. Clean, documented personal income. A W-2 earner or a landlord whose returns show solid net income can clear a debt-to-income test without help from the rentals.
2. Few financed properties. If most of your portfolio is free and clear and you hold one or two financed properties, the count and reserve rules are manageable.
3. Title already in your own name. No deed transfer, no entity friction.
4. One-time need. If you pull cash once and do not plan to refinance again soon, the absence of a prepayment structure is a real plus.
5. A planned conventional purchase later. Sequence matters. A DSCR cash-out does not use up your debt-to-income room the way an agency loan can, but if you already know the next deal is agency, run both files through your lender first.
Picture a landlord with two rentals owned outright and a day job with steady income. Rentals are in her own name. For her, the agency route may be the cleaner path, and the DSCR route would be an alternative to price against it.
When DSCR Cash-Out Is the Better Fit
DSCR is the better fit when the personal-income test is the weak link rather than the equity.
1. Tax returns that undersell the portfolio. Depreciation and write-offs lower taxable income. A DSCR file looks at rent covering the payment instead. These loans are designed for non-owner-occupied investment properties, and because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
2. Rentals held in LLCs. Many DSCR programs lend to entities, subject to lender program eligibility. A personal guaranty typically remains, so an LLC does not make the loan non-recourse.
3. A growing portfolio. DSCR programs are generally not gated by a financed-property count. Reserves and coverage are the gates.
4. Larger balances. Loan sizes run up to $3,000,000 on standard programs. Above $2,500,000 the network generally holds to 30-year fixed structures, and reserves step up to about 9 months above $1,500,000.
5. Structure options. Select lenders in the network offer 40-year terms and interest-only periods, and ARM structures exist for investors who want them.
The tradeoffs are real. Cash-out leverage on a standard rental tops out around 75% LTV, with about 6 months of seasoning measured from title recording. Credit floors begin at 620 in parts of the network, most programs want around 660, and 700 or above unlocks the strongest tiers. Prepayment structures are common on DSCR loans, so a landlord planning to refinance or sell within a few years should ask before choosing. Short-term rentals run lower: cash-out on STR collateral tops out around 70% LTV, with a 640+ score and about 12 months of hosting history expected. 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.
Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs. That is worth knowing before you pick a rental to refinance.
Cash Pulled vs. Coverage Left
This is the part most landlords miss. A DSCR cash-out is limited twice: once by LTV, and again by coverage on the new, larger payment.
Say you own a rental free and clear. You pull the maximum 75% LTV. The new payment is now the whole obligation, and the rent must cover it. If rent supports a ratio around 1.2x at 60% LTV, the same rent may sit near or below 1.00x at 75%. Pulling less cash raises the ratio. Pulling more lowers it. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
So the practical question is not just how much equity you have. It is how much payment the rent can carry at the coverage level the program wants. Some landlords land at a number well under the LTV cap. That is normal. Run the numbers in the site’s illustrative calculator before you pick a target.
The strongest cash-out files clear both tests: enough equity and enough rental coverage. Pulling more equity out raises the loan balance and the payment, which can pressure the coverage ratio, and it never erases leverage caps, credit floors, reserve rules, or property eligibility.
Which Rental to Refinance First
Multi-property landlords should rank the portfolio before picking a loan type.
- Free and clear, strong rent. Best candidate. Coverage holds at higher leverage, and there is no old payoff to cover.
- Lightly leveraged, strong rent. Good candidate. The payoff comes off the proceeds, and you may give up a low-payment existing loan. Weigh that before you trade it.
- Free and clear, thin rent. High equity but limited proceeds. Coverage, not LTV, is the binding limit.
- Mixed-condition property. Appraisal and rentability questions come first.
Net proceeds are what remain after payoff, closing costs, and reserves documentation. Reserves are commonly around 6 months of PITIA, though they vary by lender, leverage, loan size, and transaction type, and conservative rate-and-term files at modest leverage under $1,500,000 can see them waived. A landlord who plans to use the cash for the next down payment should build in the reserve requirement on the new loan too.
Use-of-proceeds also matters. 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.
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 Derails These Files
Agency files stall on entity title, financed-property count, and income that looks thin after depreciation. DSCR files stall on different things:
1. Rent evidence. Lenders generally credit the lower of the in-place lease and the appraiser’s market rent. A lease below market lowers the ratio.
2. Entity documents. Operating agreement, certificate of good standing, and the signer’s authority need to match the title.
3. Insurance completeness. A quote that leaves out a required coverage line forces a rerun of the ratio.
4. Reserves documentation. Statements need to show the funds are seasoned and sourced.
5. Appraisal access. Occupied properties need tenant access for the interior inspection.
6. Seasoning proof. The recording date, not the closing statement alone, anchors the 6-month count.
No personal income documentation does not mean no documentation. Leases, the appraisal rent schedule, entity documents, credit, insurance, and reserves are all still required.
The Verdict
Neither loan is better in the abstract. Agency cash-out suits the landlord whose personal income is clean, whose rentals are in her own name, and who holds few financed properties. DSCR cash-out suits the landlord whose portfolio carries more weight than their tax returns show, who holds title in entities, or who wants to keep scaling. If you qualify for both, price them side by side in the calculator and compare prepayment structure, reserves, and how each loan affects your next purchase.
Lendmire’s complete DSCR loans guide covers program mechanics in more detail. 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, through select lenders in its wholesale network across 41 markets, including Washington, D.C. Qualification is subject to lender guidelines and is not a commitment to lend.
Key Terms Defined
Cash-out refinance: A new loan that pays off the old one and returns the extra equity as cash at closing.
DSCR: Debt service coverage ratio, found by dividing monthly rent by the full monthly PITIA obligation.
PITIA: Principal, interest, taxes, insurance, and any association dues on the property.
Seasoning: The required period of ownership or loan age before a cash-out is allowed.
Form 1007 / Form 1025: Appraisal rent schedules for single-family rentals and for two-to-four unit properties, respectively.
Frequently Asked Questions
Can a paid-off rental still be cashed out under a Fannie Mae loan?
Yes, with conditions. There is no first mortgage to age, so the title-ownership wait is the relevant clock, and you still have to clear the income, debt, and financed-property tests. Title must also be in your own name, not an LLC.
Does a DSCR cash-out count my personal income?
Not as the main test. The file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Credit and a guarantor still matter, and documents such as leases, an appraisal rent schedule, and entity paperwork are required.
How much cash can I take on a DSCR cash-out?
It depends on the lower of two limits: about 75% LTV on a standard rental (around 70% on short-term rental collateral) and the coverage on the new payment. Reserves and credit tier affect the final figure. It is not a guaranteed cash amount. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Can I keep my LLC as the borrower?
Often under DSCR programs, subject to lender program eligibility. Agency rules published in Fannie Mae’s guide require natural-person borrowers, with title moved out of the LLC to close.
Do DSCR loans have prepayment penalties?
They commonly do, and structures vary by program. Agency loans do not typically carry that feature, so ask early if you may refinance or sell within a few years.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
2. Fannie Mae Selling Guide B2-1.3-03
3. Fannie Mae capital markets notice, cash-out eligibility
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Lenders Underwrite a Super Jumbo DSCR Cash-Out Refinance on a Paid-Off Property · Can a DSCR Cash-Out Close Without a Spouse in Community-Property States? · How to Qualify and Apply for a DSCR Cash-Out Refinance With Rent Covering 90% of Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.