What actually kills DSCR loans at underwriting

What actually kills DSCR loans at underwriting

Lender · Salt Lake City, UT · Member since 2022 · 7 posts · 4 votes

I'm a mortgage broker in Utah and I do a lot of DSCR. Figured I'd write up the things I watch blow up files, since most of them are avoidable if you know about them going in.

Rent documentation mismatches. Lenders pull rent two ways: the appraiser's 1007 market rent schedule, and your actual lease. Some programs take the lower of the two. If your lease is below market because you gave a tenant a deal, that's the number they use. If you're counting on a lease, have two months of proof that rent was actually received. A signed lease with no bank deposits behind it doesn't count.

Vacant on a refinance. If the property is empty when you refi, most lenders cut max LTV by about 10%. Get it leased first if you can.

Listed for sale in the last six months. A lot of programs won't touch a property that was recently on the market. If you listed it, pulled it, and now want to refi, expect a wait.

Short-term rental income. Not treated the same as long-term. Some lenders won't count it at all. Others will but reduce your max LTV or require documented operating history. Don't assume your Airbnb projections qualify you.

Small loan amounts need a higher ratio. On loans under $150,000, a lot of programs jump the minimum DSCR from 1.0 to 1.25. That catches people buying cheap doors, which is exactly the strategy where it hurts most.

Declining market designation. If the appraiser flags the market as declining, you can lose LTV or face a higher minimum ratio. You won't know until the appraisal comes back.

Property type. Condos with high investor concentration, manufactured homes, and co-ops are where files die. Rural can also reduce max LTV depending on the lender.

The thing nobody tells you: guidelines vary enormously between lenders. One will require 1.0 minimum, another has no minimum at all. One requires six months of reserves, another requires none under a certain loan amount. Same borrower, same property, different answer. If you got declined, it's worth asking whether it was the deal or the lender.

Happy to answer questions on specifics. Guidelines change constantly, so treat anything above as a snapshot.

4Reply
470 views

Most Popular Reply

Real Estate Agent · Salt Lake City, UT · Member since 2024 · 4 posts · 4 votes
2w

Super insightful thanks for the write up. 

See this reply in the discussion

6 Replies

Jump to latestLatest
  • Real Estate Agent · Salt Lake City, UT · Member since 2024 · 4 posts · 4 votes
    2w

    Super insightful thanks for the write up. 

    • Lender · Salt Lake City, UT · Member since 2022 · 7 posts · 4 votes
      2w

      Glad I could help!

  • Diana KhanPro Member
    Attorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 403 posts · 161 votes
    2w
    Quote from @Nick Saeva:

    I'm a mortgage broker in Utah and I do a lot of DSCR. Figured I'd write up the things I watch blow up files, since most of them are avoidable if you know about them going in.

    Rent documentation mismatches. Lenders pull rent two ways: the appraiser's 1007 market rent schedule, and your actual lease. Some programs take the lower of the two. If your lease is below market because you gave a tenant a deal, that's the number they use. If you're counting on a lease, have two months of proof that rent was actually received. A signed lease with no bank deposits behind it doesn't count.

    Vacant on a refinance. If the property is empty when you refi, most lenders cut max LTV by about 10%. Get it leased first if you can.

    Listed for sale in the last six months. A lot of programs won't touch a property that was recently on the market. If you listed it, pulled it, and now want to refi, expect a wait.

    Short-term rental income. Not treated the same as long-term. Some lenders won't count it at all. Others will but reduce your max LTV or require documented operating history. Don't assume your Airbnb projections qualify you.

    Small loan amounts need a higher ratio. On loans under $150,000, a lot of programs jump the minimum DSCR from 1.0 to 1.25. That catches people buying cheap doors, which is exactly the strategy where it hurts most.

    Declining market designation. If the appraiser flags the market as declining, you can lose LTV or face a higher minimum ratio. You won't know until the appraisal comes back.

    Property type. Condos with high investor concentration, manufactured homes, and co-ops are where files die. Rural can also reduce max LTV depending on the lender.

    The thing nobody tells you: guidelines vary enormously between lenders. One will require 1.0 minimum, another has no minimum at all. One requires six months of reserves, another requires none under a certain loan amount. Same borrower, same property, different answer. If you got declined, it's worth asking whether it was the deal or the lender.

    Happy to answer questions on specifics. Guidelines change constantly, so treat anything above as a snapshot.

    @Nick Saeva, this is a really helpful breakdown. From the legal and closing side, I’ve seen the financing issue itself become only part of the problem. The bigger stress sometimes comes when the underwriting delay starts running into contract deadlines.

    I’ve worked with investors where an appraisal issue, rent documentation problem, or lender change meant we suddenly had to look at financing deadlines, extensions, closing dates, and what was at risk under the contract. That is why I always like investors to understand both the loan requirements and the dates they agreed to in the purchase contract. A loan problem is much easier to work through when there is still time to fix it.

    I’d be glad to stay connected, @Nick Saeva. I always enjoy hearing the lender side because it helps everyone involved in the deal spot problems earlier.

    • Lender · Salt Lake City, UT · Member since 2022 · 7 posts · 4 votes
      3d

      Absolutely, glad it could help you out. That's super awesome. Super excited

  • Lender · Houston, TX · Member since 2026 · 10 posts · 3 votes
    4d

    Great list — the rent documentation mismatch is the silent killer I see most often. Investors walk in confident with a signed lease, then underwriting takes the lower of the lease vs. the 1007 and the deal reprices overnight. Two months of bank deposits behind that lease saves a lot of heartbreak.

    • Lender · Salt Lake City, UT · Member since 2022 · 7 posts · 4 votes
      3d

      Yep, absolutely. You know how it goes. That is awesome. Really love to hear it.

Join the conversationCreate a free account to reply, vote on answers and follow this thread.