The Quick Read: A DSCR HELOC qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. It is offered only when the rental sits in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. You clear the state check first, then the rent test, then credit and equity, all subject to underwriting.
- State: the rental’s location decides eligibility, not the state where you live.
- Lien: the line is a standalone second lien behind the first mortgage you keep, or a standalone first lien on a rental with no mortgage.
- Rent test: the minimum coverage is 1.10x on a stress payment that covers the whole credit limit.
- Leverage: a second lien reaches 70% combined loan-to-value at a 720 score or better, through select programs.
- Not eligible: owner-occupied homes, second homes, and several property types listed below.
What Is a DSCR HELOC, and Why Does the Label Vary?
A DSCR HELOC is a revolving line of credit secured by a non-owner-occupied rental of one to four units. The rent qualifies the line instead of your personal income. DSCR stands for debt-service coverage ratio, which is the rent divided by the payment the lender tests.
The label is loose. Across Lendmire’s wholesale network, “DSCR HELOC” can mean different products at different lenders. Some are revolving lines. Some are closed-end second mortgages that pay out one fixed amount. Some carry the name but are qualified on your tax returns.
Before you compare anything, confirm four things in writing:
1. Lien position. Is it a second lien behind your mortgage, or a first lien?
2. Review basis. Does the rent qualify the file, or your personal income?
3. Structure. Is it revolving, or a one-time lump sum?
4. Coverage test. Is the rent tested against the full line or only the drawn balance?
The program described here is a standalone second or first lien, qualified on rent, tested on the full line. It is never closed together with a purchase. It is never a third lien. It is never a line on your own home or a second home.
Where Is a DSCR HELOC Offered?
This program is offered in 15 states: Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Texas, Virginia and Washington. That is 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. It runs under Lendmire’s consumer licensing, and Lendmire arranges it as a broker through a wholesale lender.
The state that matters is where the collateral sits. Your home address does not control eligibility. A landlord living in one state can use a rental in another, as long as the rental’s state is on the list. A multi-state portfolio can be partly eligible, one property at a time.
| Where the rental sits | What it means |
|---|---|
| One of the 15 listed states | Eligible to apply, subject to underwriting |
| Tennessee | Licensed state, but the program is not offered |
| Any other state | Not offered under this licensing |
If your rental is outside the list, the usual fallback is a DSCR cash-out refinance. It replaces your first mortgage, so it is a different decision with a different footprint. The complete DSCR loans guide covers that product.
Availability is state-limited because of licensing, not because the rent math changes at a state line. A lender can only offer a consumer-licensed line where it holds the license. That is why a wholesale broker’s list and a single bank’s list rarely match.
How Do You Qualify, Step by Step?
You qualify by passing a fixed sequence of checks. Each one is a gate, and a failure at any gate ends the file, so run them in order.
1. Confirm the state. The rental must sit in one of the 15 states above.
2. Confirm the property. It must be a non-owner-occupied rental of one to four units. A two-to-four-unit building may have at most one vacant unit. A lease must be in place.
3. Confirm the lien. A rental with a mortgage you keep gets a second lien. A rental with no mortgage gets a first lien. A first lien on a rental that still has a mortgage is not available.
4. Check seasoning. A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date).
5. Run the rent test. The minimum is 1.10x, which means gross monthly rent divided by the qualifying payment. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
6. Check credit. A second lien needs a 720 score. A first lien needs 700. The score is the lender’s own report.
7. Check equity. Your leverage must fit the tier for your score and lien (next section).
8. Value the property. Valuation depends on the line size (see below).
What Is the Qualifying Payment?
The qualifying payment is a fully amortizing payment on the entire credit limit. It uses the start rate plus 2 percentage points, which makes it a stress payment. It covers principal and interest only. Taxes and insurance are not part of it.
The stress test uses the whole limit, so a big line on a modest rent can fail even if you never plan to use all of it. On a second lien, confirm on the file how the lender treats the first-mortgage payment. The lender’s own calculation governs.
Here is an illustration with ratios only. Say the stress payment on the full line comes to about 90% of the monthly rent. Coverage is then roughly 1.11x, just above the 1.10x minimum. A slightly larger line pushes it below. Real files are calculated by the lender, subject to underwriting.
How Much Can You Borrow?
Leverage depends on your lien and your score. A second lien reaches 70% combined loan-to-value (CLTV) at a 720 score or better, on lines up to $500,000. CLTV is your first mortgage balance plus the new line, divided by the property’s value. Below 720 there is no second-lien option.
A first lien uses plain loan-to-value (LTV), because there is no other mortgage. These figures are for a non-owner-occupied rental with no mortgage, through select programs, subject to underwriting.
| Lien | Credit score | Maximum leverage | Line size |
|---|---|---|---|
| Second lien | 720 or better | 70% CLTV | $50,000 to $500,000 |
| First lien | 740 or better | 75% LTV | Up to $500,000 |
| First lien | 700 to 739 | 70% LTV | Up to $500,000 |
| First lien | 720 or better | 65% LTV | Above $500,000, up to $1,000,000 |
Think of it in percentages. Say your first mortgage equals 50% of the rental’s value. At a 720 score, a second lien can add up to 20% of value before reaching the 70% CLTV ceiling. If the first mortgage already sits near 70%, there is no room for a line.
A declining-market flag lowers the leverage ceiling by 5 percentage points. Philadelphia lines carry a ceiling 10 points lower.
How Do Draws Work?
Lines start at $50,000. At least 80% of the line is drawn at closing, and the closing draw is never less than $50,000. On the smallest lines, that means the whole line is drawn at closing. Later draws are at least $5,000 each.
The draw period is 5 years, interest-only on the drawn balance. A 25-year fully amortizing repayment period follows, for a 30-year maturity. The rate is variable. The rate and pricing terms come with the lender’s disclosures.
What Disqualifies a Property or a Borrower?
Most failed files fail on one of the items below. The table puts them in one place.
| Item | Rule |
|---|---|
| Occupancy | Owner-occupied homes and second homes are out |
| Property types | Rural-designated, row homes, condotels, commercial, agricultural, leaseholds, land trusts, age-restricted, hobby farms, modular and log homes, land contracts, mixed-use |
| Recent listing | A property listed for sale in the prior 2 months |
| Liens | A property with a solar lien |
| Seasoning | 6 months since the last note date and 6 months on title |
| Credit history | No 30-day mortgage late in the last 12 months; 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu |
| Borrower status | Foreign nationals and ITIN borrowers are not eligible |
| Exposure | At most 5 loans or $2,500,000 per borrower with the program |
Eligible property types include single-family homes, PUDs, townhomes, two-to-four-unit buildings, and warrantable and non-warrantable condominiums. Lots up to 10 acres also qualify. Eligible borrowers are US citizens, permanent residents, and non-permanent residents with a Social Security number.
On the plus side, no reserves and no cash to close are required, subject to underwriting.
How Is the Property Valued?
Valuation depends on line size, and appraisal waivers are not accepted. Lines up to $400,000 use an automated valuation with a confidence score of 85 or better, paired with a property inspection report. A full interior appraisal is the other route. Lines above $400,000 need a full interior appraisal on Form 1004, 1073 or 1025.
The appraiser’s market-rent figure comes from Form 1007 on single-family homes. On small multifamily, the 1025 report carries the rent. That figure feeds the rent test above.
Title follows the lien. A first lien and any second lien above $400,000 need a full title policy. Smaller second liens use an owner-and-encumbrance report. Hazard insurance covers both liens, with flood coverage where required.
Where Do the Rules Bend or Break?
The general rule is simple: rent qualifies the line on an investment rental in a listed state. These edge cases are where it stops being simple.
Your LLC can stay on title. Vesting in your LLC is allowed on an investment property, subject to program terms. The members sign the loan documents personally. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument. The borrowers on the line need not be the borrowers on the first mortgage.
A house-hack duplex is a different file. If you live in one unit of a two-to-four-unit building, the property is owner-occupied. This line does not apply, however the rent looks.
Texas homestead rules do not follow the rental. The Texas A&M Real Estate Research Center explains that Texas Section 50 home equity loans cannot be taken out on a rental or investment property. The homestead protections attach to the owner’s home, not to a rental. So the old claim that you cannot get a line on a Texas rental confuses two different things. A rental line follows the lender’s investor guidelines, and Texas is on the list.
Business purpose changes the paperwork. 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 federal rule text on business-purpose credit sets the exemption, and it turns on the primary purpose of the credit. A consumer HELOC on your own home comes with a federal HELOC booklet requirement. A rental line is a different product, so read the lender’s disclosures for yours.
Names hide structure. A closed-end second mortgage cannot be drawn again and again. A true line can. Ask which one you are being offered before you compare terms.
How Does It Compare to Other Ways of Pulling Equity?
The real choice is usually between keeping your first mortgage and replacing it. The table sets this program beside the two alternatives. The other programs’ rules are theirs, not this program’s.
| Factor | DSCR HELOC | Personal-income investment HELOC | DSCR cash-out refinance |
|---|---|---|---|
| Lien | Second or first lien | Usually a second lien | Replaces the first mortgage |
| Review basis | Rental income | Your income and debts | Rental income |
| Your first mortgage | Stays in place | Stays in place | Paid off |
| Cash delivery | Revolving line | Revolving line | One lump sum |
If you want to keep a low-rate first mortgage and tap equity beside it, the line fits. If you need a large lump sum or want to restructure the first mortgage, a cash-out refinance fits better. Lendmire’s article How to Qualify for an Investment Property HELOC by State and Where It Is Offered covers the personal-income version.
Who Does This Fit?
The owner who wants to keep a low first mortgage. A landlord holds a single-family rental with a mortgage that is well below 70% of value. The credit score is 720 or better. Rent covers the stress payment on the full line above 1.10x. A second lien fits well, subject to underwriting.
The owner with a paid-off rental. A duplex has no mortgage. At 740 or better, a first lien can reach 75% LTV through select programs. At 700 to 739, the ceiling drops to 70% LTV. If the line would exceed $500,000, the ceiling is 65% LTV at 720 or better. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
The owner holding the rental in an LLC. Vesting can stay in the LLC, subject to program terms. The rent still has to clear the test, and the lender reviews the members’ credit.
The owner whose rental is outside the list. The property is in a state where the program is not offered. A DSCR cash-out refinance is the usual alternative. It is worth running both paths before deciding.
One caution for all four. 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.
What Documents Do You Need?
Qualified on rent does not mean no paperwork. The rent, the lease, the credit report and the valuation are all documented. Plan to supply:
- A signed lease for the rental.
- A business-purpose certification.
- Entity and title documents if an LLC holds title.
- Hazard insurance, plus flood coverage where required.
- Proof of three months of rent receipts, only if the lease is above market rent.
You do not provide tax returns, W-2s or pay stubs, and there is no debt-to-income calculation. This is subject to lender guidelines.
Key Terms Defined
DSCR (debt-service coverage ratio): gross monthly rent divided by the qualifying payment on the line.
Second lien: a loan recorded behind your first mortgage, which stays in place.
First lien: a loan in first position on a rental that has no mortgage.
CLTV (combined loan-to-value): your first mortgage balance plus the new line, divided by the property’s value.
Stress payment: the payment the lender tests, set at the start rate plus 2 percentage points on the full limit.
Seasoning: the waiting period the lender wants after you buy or refinance a rental.
Vesting: how title is held, such as in your name or in your LLC.
Frequently Asked Questions
Does the state where I live matter?
No. The rental’s location controls eligibility. An investor living anywhere can apply if the rental is in one of the 15 listed states. Each property is reviewed on its own, so a portfolio can be partly eligible.
How long after buying a rental can I get a line?
Two six-month clocks apply. The line is not available on a rental bought or refinanced in the last 6 months (last note date to new note date), and title must have been held for 6 months (settlement date to note date).
Can I use the line on a house-hack duplex where I live in one unit?
No. The program covers non-owner-occupied rentals only. A building where you live in a unit is owner-occupied, so it is a different product with a different file.
Is it available in Tennessee?
No. Tennessee is a state where Lendmire holds a consumer license, but the program is not offered there. A DSCR cash-out refinance is the usual alternative for a Tennessee rental.
Can I draw only a small part of the line at closing?
No. At least 80% of the line is drawn at closing, and that draw is never less than $50,000. After closing, each draw is at least $5,000, subject to underwriting.
Your Next Step
If you are considering a home equity line on a rental property and want to see how the numbers work, Lendmire can help you compare DSCR HELOC options based on the property, the rent, the equity available, credit profile, combined leverage, and your goals. Lendmire is a mortgage broker, not a lender, and every file is underwritten individually. Programs change, and nothing here is a commitment to lend.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges DSCR home equity lines of credit on rental property in 15 of its 16 licensed states (every licensed state except Tennessee) through wholesale lenders. The line is qualified on the rental’s rent rather than the owner’s personal income, and every line is subject to the lender’s guidelines and full underwriting. 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. Texas A&M Real Estate Research Center – What to know about home equity loans in Texas
2. eCFR – 12 CFR 1026.3, Exempt transactions
3. Federal Register – Notice of availability of revised consumer information publication
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Top DSCR HELOC Providers With Rental Income and No W-2 · How to Qualify for a DSCR HELOC With the Most Flexible Loan Options · Banks That Offer a DSCR HELOC on an Airbnb
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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
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.