The Quick Read: The lender checks five things: that a signed lease is in place, that the rent covers the line at a stress payment, that the home’s value and title support the leverage, that your credit and mortgage history are clean, and that you have owned the home long enough. Once a tenant lives there, the home is a rental, so the line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines and underwriting. Your salary is not part of the calculation.
- Lease first. A vacant house, or a home you still live in, does not fit this program, because a signed lease must be in place.
- Rent is the lesser of two numbers, unless three months of receipts support a lease above market.
- Coverage of at least 1.10x is tested on a stress payment for the entire credit limit, not just the part you draw.
- Two six-month clocks govern how recently you bought or refinanced and how long you have held title.
- Eligible in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee, through select wholesale lenders.
Why Moving Out Changes the Product
The home you used to live in is now an investment property. That one fact changes which loan you apply for.
A home equity line on a home you live in is an owner-occupied product. It is built around your income and your debt-to-income ratio. A DSCR HELOC is a different tool. DSCR stands for debt service coverage ratio, which is the rent divided by the payment the rent has to cover. A DSCR HELOC is a revolving credit line on a rental. It is written either as a second lien that sits behind the first mortgage you keep and is closed on its own, or as a first lien closed on its own if the rental has no mortgage.
Lendmire is a mortgage broker, not a lender. It places these files with wholesale lenders in its network, and each lender underwrites the file under its own guidelines. The figures here are typical ceilings and floors through select programs, subject to underwriting, and they are not offers.
Many owners like this structure because it leaves a low-rate first mortgage alone. You reach the equity without refinancing it.
The Checklist: What the Lender Reviews, in Order
| What the lender checks | What proves it | Where files snag |
|---|---|---|
| Use of the property | Signed lease | No lease, or owner still lives there |
| Rent figure | Lease plus appraiser’s rent schedule | Lease sits above market, no receipts |
| Coverage | Rent against stress payment on full line | Ratio under 1.10x |
| Credit | Lender’s own credit report | Score under 720 on a second lien |
| Value | Automated valuation or appraisal | Declining-market flag, ineligible property type |
| Title and insurance | Title work, hazard policy | Policy doesn’t match how the home is used |
The sections below take each row in turn. For the bigger picture on how these loans work, see Lendmire’s complete DSCR loans guide.
Does the Lender Need a Signed Lease?
Yes. A lease in place is required, and it is the lender’s main proof that the home has changed use.
The lease needs to be real and current. Nightly-booking income alone does not stand in for it. 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. If your plan is to list the home on a nightly platform, ask the broker early how that plan fits a program that wants a lease.
A recently signed lease still counts. The lender cares that the lease exists and that it matches the rent figure used in the coverage test. A tenant who moved in this week is a different file from a tenant who has paid for a year, but only the lease and the rent comparison are required, and receipts matter only in one case, covered next.
On a two-to-four-unit building, at most one unit may be vacant, and the rest need leases. If you live in one unit of a duplex, the building is reviewed as a primary residence, and this line is never offered on an owner-occupied home.
Which Rent Does the Lender Use?
Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market.
The market rent comes from the appraiser’s rent schedule. For a one-unit home that is Form 1007. A two-to-four-unit building uses Form 1025, which builds the rent analysis into the report. The rent schedule rests on monthly-lease comparables. Fannie Mae’s appraiser guidance says Form 1007 cannot be supported by nightly short-term rates multiplied by 30. That is another reason a nightly-rental plan sits awkwardly with a lease-based program.
Here is how the gap plays out. Say your old home leases for noticeably more than the appraiser’s market rent. With no receipts, the market figure drives the ratio, and the file might land near 1.05x, under the 1.10x minimum. With three months of rent receipts, the lease figure counts, and the same file might clear 1.15x. These ratios are illustrations, and the lender’s own calculation governs.
The practical lesson is simple. A tenant who pays on time and leaves a paper trail can help the file. A generous lease signed with a friend, and never paid on, usually adds nothing.
How the Coverage Test Works
The test divides gross monthly rent by a qualifying payment. That payment is principal and interest, fully amortized over the entire credit limit, at a stress rate set above the starting rate. The lender applies it to the whole line, including the part you never draw. Taxes and insurance are not part of the qualifying payment. The minimum coverage is 1.10x.
This catches people off guard. A $300,000 line that you plan to draw at 80% is still tested as if the full limit were drawn and repaid. A large line on a modest rental can fail the test even when your actual payments would be small. Sizing the line to the rent is the usual fix.
On a second lien, confirm on the file how the lender treats the first-mortgage payment in its coverage calculation. Programs differ, and the lender’s own calculation governs.
Leverage: What Your Equity Can Support
Leverage depends on lien position and credit score.
On a second lien behind your existing first mortgage on a rental, the program allows up to 70% combined loan-to-value (CLTV). CLTV means the first mortgage balance plus the new line, divided by the home’s value. It requires a 720 credit score or better, and lines run from $50,000 up to $500,000. Below 720 there is no second-lien option. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
On a first lien, which applies only to a rental with no mortgage, the ceilings are loan-to-value (LTV) figures:
- 740 or better: up to 75% LTV on lines to $500,000.
- 700 to 739: up to 70% LTV on lines to $500,000.
- Lines above $500,000, to $1,000,000: a 65% LTV ceiling at 720 or better. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
A declining-market flag lowers these ceilings by 5 points. Philadelphia lines carry a ceiling 10 points lower. Every figure here is a ceiling reached only with the right credit and property, subject to underwriting.
Can the Home Sit in an LLC?
Yes, with limits. Vesting in your LLC is allowed on an investment property, subject to program terms. The members sign as guarantors. A title holder who is not a borrower signs a non-borrowing owner acknowledgment and the security instrument.
Bank rental HELOCs that qualify on personal income often prefer your own name or a trust, so a DSCR line is a common route for owners who want the LLC to keep title. If you plan to move the home into an LLC after moving out, remember that title changes can reset conversations about ownership history, so raise it with your broker before you apply.
Credit and Mortgage History
Income is not calculated, but credit is. The tier comes from the lender’s own credit report. The minimum is 720 on a second lien and 700 on a first lien.
Mortgage history matters too. The typical standards are no 30-day late payment in the last 12 months, and 48 months since a bankruptcy, foreclosure, short sale, or deed-in-lieu. Tradeline-depth rules are waived at 700 and above, and every tier this program offers meets that score.
No reserves and no cash to close are required. One exposure cap applies: at most 5 loans or $2,500,000 per borrower with the program. Eligible borrowers are U.S. citizens, permanent residents, and non-permanent residents with a Social Security number. Foreign nationals and ITIN borrowers are not eligible.
The Two Six-Month Clocks
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).
This matters for a specific reason. Many owners refinance their home just before moving out, which restarts the first clock. If you refinanced recently, the line may have to wait. Check your note date before you plan the timing of anything else.
How the Home Gets Valued
Value is checked two ways, and appraisal waivers are not accepted.
- Lines up to $400,000: an automated valuation with a confidence score of 85 or better plus a property inspection report, or a full interior appraisal.
- Lines above $400,000: a full interior appraisal on Form 1004, 1073, or 1025.
The lender also orders title work. A full title policy is typical on a first lien and on second liens above $400,000. Smaller second liens use an owner-and-encumbrance report. Hazard insurance must cover both liens, with flood coverage where required.
A practical point on insurance: your old homeowner policy was written for a home you live in. A policy that matches how the property is now used keeps the story consistent across the lease, the valuation, and the paperwork. A BiggerPockets discussion on converting a primary residence to a rental notes that a landlord policy can alert a lender to the change, which is one more reason to disclose the move up front.
What Doesn’t Fit This Program
Some homes fall outside the program no matter how strong the rent is. Not eligible are:
- rural-designated property, row homes, and condotels
- leaseholds, land trusts, and age-restricted communities
- hobby farms, modular and log homes, and land contracts
- commercial, agricultural, and mixed-use property
- a property listed for sale in the prior 2 months, and a property with a solar lien
Eligible types include single-family homes, PUDs, townhomes, two-to-four-unit buildings, and warrantable and non-warrantable condominiums, plus lots up to 10 acres. Leverage tiers above apply to every property type.
Row homes are worth flagging because many older city homes are row homes. If your old home is one, this program is the wrong lane, and a different product may be a better match.
What About a Line Opened Before You Moved Out?
That is a different question, and it deserves care. A HELOC opened on your primary residence is an owner-occupied product, and it comes with occupancy terms in its paperwork. Renting the home soon after opening a line can conflict with those terms.
The safe course is to read the occupancy section of your documents and tell your lender about your plans. Opening a loan while quietly planning to rent can create a misrepresentation problem. A DSCR line is built for the situation you are actually in: a leased home qualified on its rent. 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, a distinction the CFPB’s Regulation Z guidance describes for rental credit.
Scenarios: Where Your Situation Lands
| Your situation | Read |
|---|---|
| Moved out, no tenant yet | Not yet; a lease is required |
| Lease signed this month | Lease in place; rent comparison decides |
| Lease above market, no receipts | Market rent governs the ratio |
| Lease above market, 3 months of receipts | Lease rent can count |
| Duplex, one unit vacant | Reviewable; two vacancies is too many |
| Duplex, you live in one unit | Owner-occupied; not offered |
| Refinanced the home recently | Wait out the note-date clock |
| Home is a row home | Outside this program |
These are program reads, not approvals. Every file is underwritten individually.
How the Line Works After Closing
The draw period is 5 years, interest-only on the drawn balance. A 25-year fully amortizing repayment period follows, with a 30-year maturity. The rate is variable.
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. That structure suits an owner who has a use for the money, such as a down payment on the next rental. The line cannot be closed together with a purchase, so the funds go to the purchase lender as borrowed funds, and that lender has to accept them.
Key Terms Defined
DSCR: the debt service coverage ratio, meaning monthly rent divided by the payment the rent must cover.
DSCR HELOC: a revolving credit line on a rental, qualified on the rent instead of your personal income.
Second lien: a loan secured by the same property, sitting behind the first mortgage.
CLTV: combined loan-to-value, the first mortgage plus the new line, divided by value.
Stress payment: a payment calculated at a higher rate than the starting rate, used only to test coverage.
Form 1007: the appraiser’s single-family rent schedule, which estimates market rent from monthly-lease comparables.
Seasoning: the waiting period a lender requires after a purchase or refinance.
Before You Apply: A Short Document List
- The signed lease, and rent receipts if the lease sits above market
- Your first-mortgage statement, if you are going second lien
- Hazard insurance that matches the property’s current use
- Title or ownership details, including LLC documents if applicable
- Your note date and settlement date, to check both six-month clocks
The right program for your situation depends on lien position, credit, equity, property type, and how the home is titled. A broker that shops several wholesale lenders can match the scenario to the program that fits, since guidelines differ from lender to lender.
Frequently Asked Questions
Does the lender look at my personal income?
No. The line is reviewed on the rent, with no traditional personal-income documentation, W-2s, pay stubs, or personal income calculation, subject to lender guidelines. Credit, mortgage history, the lease, title, and the valuation are all still reviewed, so the file is documented, just around the property instead of your paycheck.
How long do I have to own or have refinanced the home?
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). If you refinanced just before moving out, check that note date first.
Which rent counts if my lease is above market?
The lender starts with the lesser of the lease and the appraiser’s market rent, unless three months of rent receipts support a lease above market. Without that proof, the market figure sets the coverage ratio.
Can I use this line to buy my next rental?
Not directly. The line is never closed together with a purchase. It produces cash, and the purchase lender has to accept borrowed funds for a down payment. Confirm that with the purchase lender before you rely on it.
Is the program available everywhere?
No. It is offered in 15 of Lendmire’s 16 licensed states, every licensed state except Tennessee. Individual lenders may also apply their own restrictions, so availability depends on the property and the program.
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. Before you apply, it helps to have a lease that matches the appraiser’s market rent, a clear note date, and a line sized to the rent.
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. Fannie Mae, Appraiser Update
2. BiggerPockets, Converting primary residence to rental
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best DSCR HELOC Program Without Staying With Your Current Mortgage Lender · When a DSCR HELOC Makes Sense Without a Cosigner · Where to Get a DSCR HELOC When the Rental Property Value Is Small
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
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.