The Quick Read: Lenders treat the refinance and the next purchase as two separate loans, each underwritten on its own. The refinance is sized by loan amount, appraised value, and rent coverage on the new, larger payment, and the cash that comes out is meant for the investing business.
- Cash-out leverage steps down as the loan grows: 75% to $1,000,000, 70% to $1,500,000, and 60% to $3,000,000 on a cash-out, with none above $3,000,000, subject to underwriting.
- Rent coverage is retested on the new payment, so a property that passed before the pull can fail after it.
- Cash-out proceeds do not count toward reserves in Lendmire’s network.
- Two appraisals are expected above $2,000,000.
- Above $3,000,000 the answer is a rate-and-term refinance or a smaller balance, not a cash-out.
Most of the friction on these files has nothing to do with the buyer’s income. It sits in the order of the gates: size tier first, coverage second, credit and reserves third, appraisal fourth. Lendmire is a mortgage broker that arranges these loans through select wholesale lenders across 41 markets, including Washington, D.C. What follows is how those lenders actually work a file, step by step, and where the usual rules break.
Key Terms Defined
Super jumbo: A loan size tier that lenders define themselves, often starting around $2,000,000. No agency or regulator sets the line.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly housing obligation, including principal, interest, taxes, insurance, and HOA dues.
Cash-out refinance: A new loan larger than the payoff on the old one, with the difference paid to the borrower after costs.
Seasoning: The ownership period a lender wants to see before it sizes a loan on appraised value rather than cost.
Reserves: Liquid funds held after closing, counted in months of the property’s payment. They have to come from somewhere other than the refinance itself.
What Is Actually Being Underwritten?
Two loans. The first is the cash-out refinance on the property you already own. The second is the purchase of the next rental, which a different lender reviews on its own terms. The first loan has to pass without leaning on the second, and the second has to document where its down payment came from.
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. Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines, rather than on personal tax returns.
That does not mean no underwriting. Credit, reserves, property type, and the appraisal still decide the file. Super jumbo is not a regulated category either. Lenders set their own lines, and they answer the added risk with lower leverage and caps on proceeds. Market surveys put non-QM jumbo products at $3 million and up, as Scotsman Guide notes. Inside Lendmire’s network, the ladder runs from $150,000 to $10,000,000, with the standard program stopping at $3,000,000. For the broader product basics, see the complete DSCR loans guide.
How Underwriting Works, Step by Step
Each step can cap the next one. Work them in order.
1. Classify the transaction. Cash-out means the new loan exceeds the payoff, and the difference is paid out. A refinance that returns no cash is rate-and-term, which sits on a different leverage line. Proceeds equal the new loan minus the payoff, closing costs, and any holdbacks.
2. Confirm the loan tier. Loan size, not property value, sets the maximum cash-out leverage. Compute value times leverage first, then read the band that loan lands in. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
3. Order the appraisal. It supplies two numbers: value, which sets leverage, and market rent, which sets coverage. Rent documentation uses the appraiser’s rent schedule, Form 1007 for a one-unit property and Form 1025 for two to four units. Those are only appraisal form names. Agency loan rules do not govern DSCR files. Fannie Mae describes the Form 1007 rent schedule as the appraiser’s comparable-rent attachment for a single-family investment property. Above $2,000,000, two appraisals are expected.
4. Pick the rent figure. On most files it is the lower of the signed lease and the appraiser’s market rent. A lease above market adds nothing. A vacant property uses market rent. Lenders like proof the rent is actually collected, such as bank deposits.
5. Run coverage on the new payment. This is the step investors skip. Coverage is rent divided by the full payment on the larger balance. A property that cleared 1.00 at purchase can land under it after the pull.
6. Take the smaller of two loan sizes. One is appraised value times the cash-out leverage cap. The other is what rent supports at the required coverage. Your check is the smaller loan, minus payoff and costs.
7. Apply seasoning. Before the seasoning clock runs out, loans are commonly sized on cost, meaning purchase price plus documented rehab. After it, appraised value governs. The clock typically runs about six months from title recording.
8. Check credit, reserves, and title. Cash-out files stall on title history, payoff statements, and proof of seasoning more often than on the ratio. Prior liens are paid from proceeds.
9. Document the use of proceeds. The money is meant for the investing business. Buying another rental fits, and the file should show where the cash goes.
Which Limit Binds First?
Size binds first. Coverage binds second. Everything else tightens around those two. The table reads the leverage ladder at coverage of 1.00 or higher, as ceilings through select wholesale programs, subject to underwriting.
| Loan band | Purchase | Rate-and-term | 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 works alongside the ladder. The program floor is 660 on loans to $3,000,000 and 700 above it. The top leverage cell in each band needs more: 660 or better in the first band, 700 or better from $1,000,000 to $1,500,000, and 720 or better from $1,500,000 to $3,000,000. A lower score takes a lower cell in the same band. Cash-out is also off the table for 680-and-below credit above $1,500,000. Above $3,000,000, the super jumbo overlay adds a clean housing history, 48-month event seasoning, and no rural property, with no more than ten acres on a non-rural one.
Each cash-out figure in the table belongs to its loan band, not to the property’s value. Short-term-rental collateral runs lower than long-term-rental cash-out. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A common misconception is that the coverage ratio rises with loan size. It does not. Coverage stays at 1.00 for full leverage. What tightens is leverage, credit, reserves, and appraisal count.
Coverage: How a Bigger Balance Changes the Number
Run the numbers on a luxury rental valued at $2,400,000. Assume a modeled loan at 60% of value, which works out to roughly $1,440,000 and falls in the $1,000,000 to $1,500,000 band. Say rent supports that payment at roughly 0.9x. The loan fails the 1.00 benchmark even though the leverage cap allows it.
Two things can happen. The lender sizes the loan down until coverage clears, which shrinks the cash out. Or the deal works to a select program that reviews coverage between 0.75 and 0.99, to $2,000,000. There, LTV and terms adjust, subject to underwriting.
Interest-only helps here. A 120-month interest-only period on 30- and 40-year terms runs to 75% leverage, with coverage of 0.75 or better, qualified on the interest-only payment. It lowers the payment and can lift the ratio. The catch is a larger balance and a larger payment later. An investor pulling cash into a new interest-only period should model both the early number and the reset. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Reserves Are a Separate Pool
Cash-out proceeds never count toward reserves in Lendmire’s network. This is the line item that surprises people planning to buy the next rental with the refinance money.
Typical reserves are six months of the subject property’s payment (interest only on an interest-only loan), and twelve for first-time investors. Some lenders elsewhere allow proceeds to count, and policies vary by lender, so do not assume it. Plan for three buckets: the next purchase’s down payment, the reserves on the refinanced property, and the reserves on the new one. Program rules add no extra reserves for other financed properties, and a borrower can hold up to 20 financed properties.
Proceeds are also not unlimited. At or below 60% LTV, cash-out proceeds are unlimited. Above 60%, they are capped at $1,500,000. A prepayment charge on the old loan comes out of the proceeds, along with closing costs and holdbacks. Quote yourself net, not gross. 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.
Turning the Cash Into the Next Purchase
Three sequences exist. Each has a different file burden.
| Sequence | How it works | Main friction |
|---|---|---|
| Refinance first | Pull cash, then buy | Seasoned funds trail |
| Buy first | Buy, then refinance later | Needs other cash or a bridge |
| Bridge then refinance | Short-term loan, then permanent debt | Payoff may count as rate-and-term |
Refinancing first is cleanest for the second lender. The settlement statement shows the cash, the account path shows where it moved, and the file is easy to read. Buying first works when the investor has liquidity elsewhere. A bridge payoff is often treated as rate-and-term, depending on the program and how recently the property was bought.
A purchase can also run higher leverage than a cash-out. At $2,000,000 to $3,000,000, the ladder allows 75% on a purchase against 60% on a cash-out. For some investors the better question is whether to refinance one asset at all or to finance the next one directly at higher leverage.
What If Cash-Out Isn’t Available at Your Size?
Above $3,000,000, there is no cash-out. The workarounds are real, though.
- A rate-and-term refinance on the large asset can be paired with a separate cash-out on a different asset.
- A smaller balance can fit inside the ladder.
- The debt can be staged across properties.
Every request above $4,000,000 is reviewed case by case before submission, purchase or rate-and-term only, so figures there are always “on review.”
Edge Cases Where the Rule Bends
Delayed financing for all-cash buyers. It waives only the seasoning wait. Coverage, reserves, appraisal, credit, and leverage all still apply.
Short-term rentals. Coverage must be 1.00 or higher, loans run to $2,000,000, and income is twelve months of operating history on a refinance, counted at 80% of gross. Experienced investors only. The appraiser’s rent schedule uses monthly-lease comparables and was not designed for nightly pricing, per Fannie Mae’s appraiser guidance. 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. Cash-out leverage on short-term-rental collateral is lower than on long-term rentals. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Property type. Manufactured homes, log homes, and barndominiums are not offered in these programs. Non-warrantable condos run to 75% and $1,500,000.
Entity vesting. Entity vesting is welcome, with no layered entities, subject to program terms. If title is in motion on an LLC-held property, vest it first, then refinance.
Occupancy. Because these are business-purpose loans, lenders collect business-purpose and occupancy certifications. Regulation Z treats the purpose test case by case, and occupancy beyond 14 days a year on a one- to two-unit property can change the analysis.
Where Files Stall
Most delays come from preventable gaps.
- Testing rent against the old payment instead of the new one.
- Quoting gross proceeds as spendable cash.
- Ignoring a prepayment charge on the old loan.
- Counting proceeds toward reserves.
- Assuming a strong ratio waives seasoning. Seasoning and coverage are separate tests.
- Relying on an above-market lease. The lower of lease or market rent is typically used.
- Missing the second appraisal above $2,000,000, which is a scheduling and cost item that is easy to forget.
One pattern worth knowing from placing these files: the borrower who lines up the payoff statement, title history, and seasoning proof before submission has far fewer questions to answer mid-review. The ratio is rarely the surprise. The paperwork usually is.
Is It the Right Move?
It tends to fit when the property has real equity at its loan band, rent still covers the larger payment, and liquid funds exist for reserves on both properties. It fits less well when coverage is already thin, the loan sits above $3,000,000, or the plan depends on proceeds doubling as reserves. In a few cases a direct purchase at higher leverage beats a cash-out. For a related angle on sizing when rent runs light, see Lendmire’s piece How Lenders Underwrite a Super Jumbo DSCR Cash-Out Refinance on Below-Market Rental.
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. Reach the team at 828-256-2183 or request a quote.
Frequently Asked Questions
Can cash-out proceeds fund the down payment on another rental?
Yes. Buying another rental fits the business-purpose use the lenders expect, and the file should show where the cash goes. The purchase lender will want the settlement statement and the account path. Proceeds do not satisfy reserves, so the down payment and the reserves have to be funded separately.
Does the cash-out count as my reserves?
Not in Lendmire’s network. Reserves typically run six months of the subject property’s payment, twelve for first-time investors, and they must come from other liquid funds.
What coverage ratio do I need?
A ratio of 1.00 earns full leverage. Select programs review coverage between 0.75 and 0.99 to $2,000,000, with LTV and terms adjusted, subject to underwriting. Short-term-rental files need 1.00 or higher.
Is super jumbo a regulated loan category?
No. Lenders define the tier themselves, often starting around $2,000,000, and manage the added risk with lower leverage and proceeds caps. The business-purpose treatment of investor loans is why DSCR files focus on property rent.
What if my loan is above $3,000,000?
There is no cash-out at that size. Options include a rate-and-term refinance, a smaller balance, or staging the debt across assets. Above $4,000,000, every request is reviewed case by case before submission.
For current guidelines and terms, see Lendmire’s super jumbo DSCR loan programs page.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
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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. Scotsman Guide, non-QM jumbo
2. Fannie Mae Form 1007, Single-Family Comparable Rent Schedule
3. Fannie Mae Appraiser Update
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: How Lenders Underwrite a Super Jumbo DSCR Cash-Out Refinance After Delisting the Property
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.