The Quick Read: Lenders underwrite a super jumbo DSCR cash-out refinance on a below-market rental by crediting the lower of the lease rent and the appraiser’s market rent, testing that rent against the new, larger payment, and then sizing the loan at the smaller of what the value supports and what the rent supports, subject to lender guidelines. Most programs work this way, but a few treat an old, low lease differently. Every figure below is subject to underwriting.
- A lease set under market rent usually holds your rent used for lender review down, so it limits your loan twice: once through coverage and once through leverage.
- The coverage test runs on the new payment after cash-out, not your old one.
- Above $2,000,000 of loan amount, two appraisals are required, and the lower value typically governs.
- Cash-out leverage steps down as the loan grows and stops above $3,000,000.
- The lease gap is often the one input you can change before you apply.
Key Terms Defined
Super jumbo: a loan size set by each lender, not by law. In this program family the line sits around $2,000,000 of loan amount.
DSCR (debt service coverage ratio): qualifying monthly rent divided by the full monthly housing payment: principal, interest, taxes, insurance and any HOA dues.
Market rent: what the appraiser concludes the property would rent for today, shown on a rent schedule attached to the appraisal.
Below-market rental: a property whose actual lease sits under that market rent figure.
Cash-out refinance: a new loan that pays off the old one and hands you the extra equity as cash.
PITIA and ITIA: PITIA is the full payment with principal. ITIA drops principal and applies to interest-only loans.
Reserves: your own liquid cash, measured in months of payments, that you must hold after closing.
The Underwriting Sequence at a Glance
The deal works through six gates in order, and each one can cap the next. A strong rent figure cannot rescue a weak value, and a strong value cannot rescue weak coverage. Whichever gate gives the smallest loan wins.
1. Scenario sizing. The lender reads the requested loan amount, property type and credit tier to find the program band.
2. Appraisals. One or two reports set the value and the market rent.
3. Rent selection. The underwriter picks the rent that counts, usually the lower of lease and market rent.
4. Coverage on the new payment. The chosen rent is divided by the payment on the proposed larger loan.
5. Leverage and proceeds caps. The cash-out ladder limits the loan against the lower appraised value.
6. Reserves and borrower review. Credit, liquidity, entity papers and housing history get checked.
What the Appraisals Produce, and Why Large Files Get Two
An appraisal on a rental does two separate jobs. It gives a value, which drives leverage, and it gives a market rent, which drives coverage. A big value with a thin rent opinion can still produce a small loan.
On a one-unit property, the rent opinion comes on a single-family comparable rent schedule, Form 1007. It is attached to the appraisal and lets the lender obtain market rent from the appraiser. Two-to-four-unit properties use a different small-income report. These are only appraisal form names. DSCR loans are not agency products, and agency loan rules do not govern them.
Above $2,000,000 of loan amount, the programs Lendmire places files with require two appraisals. Each report carries a value and a rent schedule. The lower value typically governs loan size. The two values do not have to match, but both must clear review. If the two rent opinions diverge, the lender typically works from the more cautious one.
Luxury collateral makes this harder. Large or heavily amenitized homes often have thin comparable sales, so two appraisers can land far apart. Plan for that spread before you count on a number.
Which Rent Does the Underwriter Credit?
Most programs credit the lower of the signed lease and the appraiser’s market rent. If your lease is under market, the lease usually sets the numerator, and the market figure sits unused. A lease above market adds little, because market rent caps it.
| Situation | Rent typically credited | What you can do |
|---|---|---|
| Lease below market | Lease, on most programs | Renew at documented market rent |
| Lease above market | Market rent | Nothing; the excess is ignored |
| Month-to-month or expired | Market rent, lease as support | Sign a fresh lease |
| Vacant | Market rent alone | Lease it before you apply |
| New tenant | Lease is evidence, not the final figure | Document deposits |
| Subsidized unit | Often held to the contract rent | Ask early |
| Short-term rental | Operating history, not Form 1007 | See below |
Programs genuinely differ on the long-term, below-market lease. Some lift the rent to market for qualifying, while others cap at the lease. Across the wholesale network, the cap is the more common treatment on a seasoned lease. Do not assume the lift until a program confirms it in writing.
A leased property also needs proof the rent is real: the executed lease plus deposits that match it. If the tenant is a relative or a related company, expect the lender to look harder at those deposits.
Short-term rentals sit apart. Form 1007 documents monthly long-term rent, not nightly rates. Short-term-rental files qualify on twelve months of operating history on a refinance, counted at 80% of gross, with coverage of 1.00 or higher, loans to $2,000,000, and experienced investors only.
Why Cash-Out Makes the Ratio Harder
Cash-out lowers coverage because the test runs on the new payment. Pull more cash and the balance rises, the payment rises, and the same rent covers less of it. Investors who test their old payment get a better number than any lender will use.
The loan you can get is the smaller of two limits. One is the value times the leverage cap. The other is the loan your rent supports at the coverage the program requires.
Here is the loop. Coverage equals credited rent divided by the payment on the new loan. The payment scales with the balance, so a rent increase of 10% supports a loan roughly 10% larger, before the leverage cap bites. (Taxes and insurance do not scale with the loan, so treat that as a rough guide.) That is why a below-market lease costs so much. Every point of rent you lose shrinks the loan the file can carry.
Coverage of 1.00 earns full leverage. Coverage from 0.75 to 0.99 is a real path through select programs, up to $2,000,000, but LTV and terms adjust, subject to underwriting. Above $2,000,000, plan on clearing 1.00.
Interest-only is another lever. A 120-month interest-only period on 30- and 40-year terms goes to 75% leverage, with coverage of 0.75 or better, and the file is qualified on ITIA. That helps coverage, but the balance does not shrink. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
The Cash-Out Leverage Ladder
Leverage steps down as the loan grows. These are ceilings for coverage of 1.00 or higher through select wholesale programs, subject to underwriting. The bands are loan amounts, not purchase prices, so multiply price by leverage first, then read the band.
| Loan band | Purchase | No-cash-out refi | 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 | — |
Credit matters at the top of each band. The program floor is 660 up to $3,000,000, and 700 above it. The best cash-out cell in the $1,000,000-and-up bands needs a stronger score: about 700 from $1M to $1.5M, and about 720 from $1.5M to $3M. A lower score takes a lower leverage cell in the same band.
Cash-out proceeds have their own rules. Proceeds are unlimited at or below 60% LTV, and capped at $1,500,000 above 60%. There is no cash-out above $3,000,000. Borrowers with credit at 680 or below get no cash-out above $1,500,000. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
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.
Three Worked Examples
These use modeled ratios, not market data. They show which gate binds.
Example one: rent-bound. A luxury rental has plenty of equity, and the value would support a large cash-out. But the credited rent covers the larger payment at only about 0.9x. Above $2,000,000 the loan shrinks until coverage reaches 1.00. The loan the rent supports is smaller than the loan the value supports.
Example two: equity-bound. Coverage on the larger loan runs near 1.3x, which is comfortable. But the lower of two appraisals caps the loan at the 60% cash-out step. The extra coverage goes unused, and more rent would not raise the loan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Example three: the below-market lease, before and after. The lease holds coverage near 0.85x on the requested loan, while the appraiser’s market rent would show about 1.05x. The underwriter takes the lower figure, so the file misses 1.00. Suppose the tenant agrees to renew at a documented market rent. Rent used for lender review rises, coverage lands near 1.05x, and the same loan request now clears, subject to the program and underwriting. The same equity and the same property produce a different result, and only the lease changed.
Which Gate Binds First?
Run the numbers before you order appraisals. Ask whether you are rent-bound or equity-bound, because the fix differs.
| Symptom | Binding limit | First fix |
|---|---|---|
| Coverage under 1.00; value supports more | Rent | Document market rent; take less cash |
| Coverage is strong; loan is smaller than expected | Value and leverage | Review both appraisals; take less |
| Proceeds above the cap | Cash-out rules | Stay at or below 60% LTV |
| Strong file, short on cash after closing | Reserves | Hold your own liquid funds |
Fixing a Below-Market File
The best fix is usually the lease, because it is the one input many owners control. Sequence matters, so decide before you apply, not after the appraisal comes back.
- Renew at documented market rent. This works when the tenant agrees and the program credits the new lease. Deposits must match it.
- Take less cash. A smaller loan restores coverage right away.
- Pay down the balance first. Same effect, but it uses your own cash.
- Challenge a low appraisal rent. Specific comparable rentals can support a reconsideration request.
- Use the interest-only structure. It helps coverage, though the balance stays flat.
- Choose a no-cash-out refinance. Leverage caps are higher, but you leave the cash behind.
- Wait. If the lease expires soon, waiting to reset rent can produce a larger loan than rushing.
Honest limits apply. A tenant can refuse, and a lender will not credit rent that deposits do not support. Underwriting will not credit a future rent bump you have only talked about.
Reserves and Documents
Reserves are six months of payments on the subject property, or ITIA if the loan is interest-only. First-time investors need twelve months. There are no extra reserves for your other financed properties, and you can hold up to 20 financed properties. Plan for reserves to come from your own liquid assets, not from the cash you pull, and at the top of the ladder that rule is explicit.
Expect to provide:
- An executed lease and deposits that match it
- A credit report
- Two appraisals with rent schedules above $2,000,000
- Entity papers
- Reserve statements
- Insurance naming the correct owner
Entity vesting is welcome, with no layered entities, subject to program terms. On this experience: in files like this, the rent figure usually surprises borrowers more than the value does. Many arrive with a lease number in mind and leave with a market number, so the sooner you see both, the more options you keep.
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. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, so your personal tax returns are not the main test. For deeper background, see Lendmire’s complete DSCR loans guide.
Common Mistakes
- Testing the old payment. The new, larger payment is the test.
- Assuming the lease counts when it is high. Market rent usually caps it.
- Leaving HOA dues out. That is a common reason your math and the lender’s math differ.
- Expecting Form 1007 to capture short-term rental income. It does not.
- Counting cash-out as reserves. Reserves come from your own assets.
- Assuming the two appraisals are averaged. The lower value typically governs.
Frequently Asked Questions
Does a below-market lease always lower my loan?
Usually, yes, because most programs credit the lower of lease and market rent. Some programs lift the rent to market for qualifying, so the answer depends on the lender. Ask which treatment applies before you order appraisals.
Can I raise the rent right before I apply?
Only if the new lease is signed and the tenant’s deposits support it. Underwriting credits documented rent, not a planned increase.
Why do I need two appraisals?
Above $2,000,000 of loan amount, the lenders in this program family add a second appraisal as an extra check. It is a lender overlay, not a rule that applies to every loan. The lower value typically governs.
How much cash can I take out?
Proceeds are unlimited at or below 60% LTV and capped at $1,500,000 above 60%. There is no cash-out above $3,000,000 of loan amount. All of it is subject to underwriting and credit tier. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
Can a short-term rental qualify?
Yes, for experienced investors on documented operating history, at 80% of gross and loans to $2,000,000. Local permission must be documented for each property.
Next Steps
Start by writing down your lease rent, your likely market rent, and the loan you want. Then test the new payment against both rents. 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. Nothing here is a commitment to lend.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 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. Fannie Mae, Single-Family Comparable Rent Schedule (Form 1007)
2. CFPB, Regulation Z § 1026.3, Exempt transactions
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: Best Super Jumbo DSCR Cash-Out Refinance Program After Taking the Property Off the Market · Super Jumbo DSCR Cash-Out Refinance Requirements in a Beach Resort Market · Can You Get a Super Jumbo DSCR Cash-Out Refinance Through a Broker?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.