Reference

DSCR Loan Glossary

74+ terms every investor needs to know — from PITIA and NOI to BRRRR, SOFR, and step-down PPP. Click any letter to jump to that section, or use Ctrl+F to search.

#

1007 Rent Schedule #: A Fannie Mae appraisal form (Single-Family Comparable Rent Schedule) in which the appraiser estimates the market rent for a subject property. DSCR lenders commonly use the 1007 Rent Schedule when there is no existing lease to document income.
1025 Form #: A Fannie Mae appraisal form (Small Residential Income Property Appraisal Report) used for 2-4 unit properties. The 1025 includes an income section that DSCR lenders use to derive the gross rent for DSCR calculation on small multifamily.
2055 Exterior #: An exterior-only appraisal form (Exterior-Only Inspection Individual Condominium Unit Appraisal Report) where the appraiser does not enter the property. Some DSCR lenders accept 2055 appraisals for refinances on properties with prior interior appraisals.

A

ADR (Average Daily Rate) #: The average rental income earned per occupied day on a short-term rental property. Lenders use ADR alongside occupancy rate to estimate gross annual revenue on STR DSCR loans.
Amortization #: The gradual repayment of a loan through scheduled principal and interest payments over time. A 30-year fully amortizing DSCR loan has a balance of zero after 360 monthly payments.
Appraisal Waiver #: Lender approval to skip a traditional appraisal, typically based on automated valuation model (AVM) data. Appraisal waivers reduce cost and time but are offered selectively based on property type, LTV, and lender policy.
ARM (Adjustable-Rate Mortgage) #: A loan where the interest rate is fixed for an initial period (e.g., 5 or 7 years) then adjusts annually based on an index plus a margin. Common DSCR ARM products are the 5/1 ARM and 7/1 ARM.
ARV (After-Repair Value) #: The estimated market value of a property after renovation is complete. ARV is used in BRRRR deals to determine how much equity can be pulled out on the refinance leg.

B

Bad-Boy Carveout #: Specific provisions in a non-recourse loan that convert the debt to full recourse if the borrower commits certain acts — such as fraud, misappropriation of rents, or filing for bankruptcy. Nearly all DSCR non-recourse loans include bad-boy carveouts.
Balloon #: A loan structure where all remaining principal becomes due at a set date (the balloon date) rather than being fully amortized. Some DSCR products carry a 5- or 7-year balloon, requiring a refinance or payoff at maturity.
BRRRR #: Buy, Rehab, Rent, Refinance, Repeat — a real estate investment strategy where an investor acquires and renovates a distressed property, leases it, then does a DSCR cash-out refinance to recover capital for the next deal.
Buydown #: A prepaid interest payment (in points) that reduces the note rate on a loan. A 1-point buydown costs 1% of the loan amount. Whether a buydown is cost-effective depends on your hold period relative to the breakeven.

C

Cap Rate (Capitalization Rate) #: Net operating income divided by property value, expressed as a percentage. Used to compare investment properties independent of financing. A 6% cap rate on a $500K property means $30K annual NOI.
Cash-on-Cash Return #: Annual pre-tax cash flow divided by total cash invested (down payment + closing costs + reserves). A direct measure of how efficiently your equity is working, unlike cap rate which ignores financing.
CLTV (Combined Loan-to-Value) #: The ratio of all liens on a property to its appraised value. If a first DSCR mortgage is 70% LTV and a second lien adds another 10%, CLTV is 80%. Most DSCR lenders cap CLTV at or below 80%.
Condotel #: A condominium unit in a hotel-branded building where owners can place their unit in a rental pool managed by the hotel. Condotels are ineligible for conventional agency financing and require specialized non-QM or DSCR programs with stricter LTV limits.
Correspondent Lender #: A lender that funds loans using its own capital but then immediately sells those loans to an investor or aggregator. Correspondent lenders originate under their own name and pricing but are not warehouse-line direct lenders.
Credit Tier #: Lenders segment FICO scores into pricing bands — typically in 20-point increments (e.g., 620-639, 640-659). Each tier up generally reduces the interest rate by 0.125% to 0.25% on a DSCR loan.

D

Debt Coverage #: Shorthand for Debt Service Coverage Ratio — see DSCR. Also used loosely to describe whether a property's income is sufficient to cover the required loan payment.
Debt Service Coverage Ratio (DSCR) #: Gross monthly rent divided by the monthly PITIA payment (principal, interest, taxes, insurance, and association dues). A DSCR of 1.25 means the property generates 25% more income than its debt service. Most lenders require 1.0 or higher; no-ratio programs waive this requirement entirely.
Debt Yield #: NOI divided by the loan balance, expressed as a percentage. Commonly used in commercial real estate underwriting as a lender-focused metric independent of appraisal. Less common in 1-4 unit DSCR lending but relevant for 5+ unit deals.
Delayed Financing Exception #: A provision allowing a borrower who recently purchased a property in cash to do a cash-out refinance shortly after closing — sometimes within days — without the standard seasoning requirement. Not all DSCR lenders honor the delayed financing exception; policies vary widely.
Desktop Appraisal #: An appraisal completed remotely using MLS data, public records, and comparable sales without a physical property inspection. Faster and cheaper than a full appraisal but not accepted by all lenders or for all property types.
Discount Points #: Prepaid interest paid at closing to permanently reduce the interest rate on a loan. Each point equals 1% of the loan amount. Distinct from origination points, which are lender compensation rather than a rate buydown.
DSCR Lender #: A mortgage lender or broker that offers non-QM loans qualifying investment properties based on rental income coverage of debt service rather than borrower personal income. DSCR lenders range from direct portfolio lenders to broker-dealer networks.
DTI (Debt-to-Income Ratio) #: Monthly debt obligations divided by gross monthly income. DTI is the primary qualification metric for conventional (agency) loans but is generally not used for DSCR loans — one of the key advantages of the DSCR program for investors with complex income.

F

Fannie Mae 10-Property Cap #: Fannie Mae limits conforming financing to borrowers with no more than 10 financed properties. DSCR loans are non-QM and not subject to this cap — one of the primary reasons experienced investors use DSCR for properties 5 through 20+.
FICO Tier #: See Credit Tier. FICO scores on DSCR loans typically range from 620 (some lenders go to 580) through 780+. The score used is usually the middle of three bureau scores on the primary borrower.
Float-Down #: An option attached to a rate lock that allows the borrower to take a lower rate if market rates fall before closing. Float-down options typically cost an additional fee and have specific trigger thresholds.
Foreign National #: A non-US citizen or non-permanent resident seeking a mortgage on US investment property. Foreign national DSCR programs typically require higher down payments (30-35%), foreign credit documentation, and may use ITIN instead of SSN.
Fully Indexed Rate #: On an ARM loan, the fully indexed rate is the current index value (e.g., SOFR) plus the margin. This is the rate the loan would adjust to immediately if the fixed period ended today — used to stress-test ARM affordability.

H

Hard PPP (Hard Prepayment Penalty) #: A prepayment penalty structure where the penalty applies regardless of whether the property is sold or refinanced. Contrasts with a soft PPP that may waive the penalty on a sale. Most DSCR loans use step-down hard prepayment penalties.
Holding Company #: A legal entity (typically an LLC or corporation) that owns other entities rather than operating assets directly. Real estate investors sometimes use a holding company to own multiple single-asset LLCs, separating liability across properties.

I

Index + Margin #: The two components that determine an ARM's adjusted rate. The index (e.g., SOFR, CMT) is a market benchmark; the margin is a fixed spread added by the lender. Fully indexed rate = index + margin.
IO (Interest-Only) #: A loan structure where the borrower pays only interest for a set period (typically 10 years on a 30-year DSCR loan), with no principal reduction. IO loans improve short-term cash flow but build no equity during the IO period.
ITIN Borrower #: A borrower who uses an Individual Taxpayer Identification Number instead of a Social Security Number. ITIN programs allow certain non-US-citizen investors to obtain DSCR financing using alternative credit documentation.

L

Land Trust #: A legal arrangement in which a trustee holds title to real property for the benefit of named beneficiaries. Investors use land trusts for privacy and estate planning. Some DSCR lenders require the trust to vest title to an LLC for loan purposes.
LLC (Limited Liability Company) #: The most common entity structure for DSCR loan vesting. An LLC limits personal liability, separates the property from the borrower's personal balance sheet, and may provide tax benefits through pass-through income treatment.
LLPA (Loan-Level Price Adjustment) #: A risk-based fee adjustment added to a mortgage rate or charged as points based on credit score, LTV, property type, and other risk factors. LLPAs are standard on agency loans; DSCR lenders build similar adjustments directly into their rate grids.
Lock #: A lender commitment to hold a specific interest rate for a borrower for a defined period (typically 30, 45, or 60 days) while the loan is in process. Floating past the lock expiration can result in a higher rate or extension fee.
Long-Term Rental / LTR #: A rental with a lease term of 12 months or longer. LTR income is the simplest to underwrite for DSCR — most lenders use the executed lease or a 1007 Rent Schedule appraiser estimate.
LTV (Loan-to-Value) #: Loan amount divided by the appraised property value, expressed as a percentage. A $300K loan on a $400K property is 75% LTV. Most DSCR programs cap at 75-80% LTV on purchase and 70-75% on cash-out refinance.

M

MF (Multifamily) #: Properties with more than one residential unit. For DSCR purposes, 2-4 unit properties are treated as residential; 5+ units typically require commercial DSCR underwriting with higher reserves and stricter DSCR thresholds.
Mid-Term Rental / MTR #: A rental with a term of 30 days to 12 months — common on furnished properties targeting traveling nurses, remote workers, and corporate tenants. MTR income is harder to document for DSCR; many lenders accept 12 months of bank statements or a rent schedule.
Mixed-Use #: A property containing both residential and commercial components (e.g., street-level retail with apartments above). Mixed-use DSCR programs are limited; lenders typically require the residential portion to exceed 50% of value and may apply commercial lending guidelines.

N

No-Ratio #: A DSCR loan variant that does not require the property to meet any minimum DSCR threshold — the property's income is not the qualifying factor. No-ratio programs typically require higher FICO scores, lower LTVs, and stronger borrower reserves to compensate.
NOI (Net Operating Income) #: Gross rental income minus operating expenses (property management, maintenance, vacancy, insurance, taxes). For DSCR underwriting, lenders use rent minus PITIA rather than full NOI, which is why DSCR is not identical to a traditional cap-rate analysis.
Non-QM #: Non-Qualified Mortgage — a loan that does not meet the Consumer Financial Protection Bureau's Qualified Mortgage standards. DSCR loans are non-QM because they do not verify borrower income using IRS tax transcripts or W-2s as agency loans require.
Non-Recourse #: A loan structure where the lender's remedy on default is limited to seizing the collateral property — the borrower's personal assets are generally protected. Most institutional DSCR loans are structured with non-recourse terms, subject to bad-boy carveouts.
Non-Warrantable Condo #: A condo that fails to meet Fannie Mae or Freddie Mac eligibility requirements due to high investor concentration, pending litigation, non-residential commercial space, or other factors. Non-warrantable condos require non-QM or DSCR financing at higher rates and lower LTVs.

O

Occupancy (STR Occupancy Rate) #: The percentage of available nights that a short-term rental is booked. Used alongside ADR to project annual STR income. Lenders may use AirDNA, Mashvisor, or appraiser-estimated occupancy to underwrite STR DSCR loans.
Origination Points #: Fees charged by a lender or broker as compensation for originating the loan, expressed as a percentage of the loan amount. Origination points differ from discount points — origination goes to the lender/broker, discount points buy down the rate.

P

Personal Guarantee #: A borrower's pledge of personal assets as additional collateral for a business or entity loan. Most DSCR lenders require a personal guarantee from any individual owning 20-25%+ of the borrowing entity, even on non-recourse structures.
PITI (Principal, Interest, Taxes, Insurance) #: The four core components of a monthly mortgage payment: principal repayment, interest charges, property taxes (escrowed), and hazard insurance. PITI is the base for calculating DSCR on properties without HOA dues.
PITI Reserves #: Reserves measured in months of PITIA payment (rather than a dollar figure). A lender requiring 6 months PITI reserves on a $2,000/month PITIA loan means you must hold $12,000 in liquid assets after closing.
PITIA #: Principal, Interest, Taxes, Insurance, and Association dues — the full monthly housing expense used as the denominator in DSCR calculations. If a property has a condo HOA of $400/month, that $400 is added to PITI to get PITIA.
PPP (Prepayment Penalty) #: A contractual fee charged when a borrower pays off a DSCR loan before a specified period. DSCR prepay structures are typically step-down (e.g., 5-4-3-2-1% for a 5-year prepay). The prepay period and structure significantly affect whether to buy out the penalty.
Prepayment Penalty #: See PPP. DSCR loans nearly always carry prepayment penalties because they are held in non-agency portfolios where the investor needs protection against early payoff. Common structures are 3-2-1, 5-4-3-2-1, and 3-year step-down.

R

Rate Lock Extension #: A fee paid to extend an expiring rate lock when a loan hasn't closed within the original lock window. Extension costs typically run 0.125%-0.25% of loan amount per 15-day extension.
Rate-and-Term Seasoning #: The minimum elapsed time a borrower must own a property before doing a rate-and-term refinance. Most DSCR lenders require 6-12 months of ownership seasoning for rate-and-term refis.
Recourse #: A loan structure where the lender can pursue the borrower's personal assets beyond the collateral if the property sale proceeds are insufficient to repay the loan after a default. Contrast with non-recourse.
Reserves #: Liquid assets a borrower must hold after closing to demonstrate the ability to make mortgage payments during vacancy or emergency. DSCR lenders typically require 3-12 months of PITIA in reserves at closing.

S

Seasoning #: The time period a borrower must own a property (or have had a certain credit event age) before qualifying for a particular loan program. Seasoning requirements protect lenders from rapid-flip schemes and layered risk.
Series LLC #: A special LLC structure available in some states that allows creation of separate 'series' or cells within one legal entity, each with isolated assets and liabilities. Used by portfolio investors to hold multiple properties under one umbrella without creating a separate LLC per property.
Short-Term Rental / STR #: A rental property rented on a nightly or weekly basis through platforms like Airbnb or Vrbo. STR DSCR loans are more complex to underwrite and typically carry higher rates or lower LTVs than standard LTR DSCR loans.
Small Balance #: DSCR loans under a lender-defined threshold — typically below $150K-$250K. Small-balance loans carry rate premiums because lender origination costs are fixed regardless of loan size. Many lenders have minimum loan amounts that exclude sub-$100K deals entirely.
SOFR (Secured Overnight Financing Rate) #: The benchmark interest rate that replaced LIBOR for US dollar ARM loans. DSCR ARM products typically use 30-day or 1-year SOFR as the index. When SOFR rises, ARM rates adjust upward at each reset date.
Soft PPP (Soft Prepayment Penalty) #: A prepayment penalty structure that waives the penalty if the property is sold to an unrelated third party (i.e., the lender only charges the penalty on refinances). Soft PPPs are less common in DSCR than hard PPPs.
Step-Down PPP #: A prepayment penalty that decreases each year — for example, 5% in year 1, 4% in year 2, 3% in year 3, 2% in year 4, 1% in year 5. The most common DSCR prepayment structure.

T

Temporary Buydown #: A seller- or lender-funded subsidy that lowers the borrower's rate for the first 1-3 years only. A 2-1 buydown on a 7% loan gives the borrower 5% in year 1 and 6% in year 2 before reverting to 7%. Rare on DSCR loans but occasionally offered in slower markets.
Title Seasoning #: The minimum time a seller must have held title before a DSCR lender will finance the purchase. Anti-flipping seasoning requirements typically range from 90-180 days. Properties with title seasoning under 90 days may be ineligible or require manual review.

V

Vacation Rental #: A property rented primarily to leisure travelers, typically via Vrbo, Airbnb, or direct booking. For DSCR purposes, vacation rentals are underwritten similarly to STRs — using historical revenue data or market-comparable occupancy and ADR.

W

Warrantable Condo #: A condominium unit that meets Fannie Mae and Freddie Mac eligibility requirements — primarily that no single entity owns more than 10% of units and owner-occupied units exceed 50%. Warrantable condos can use conventional financing; non-warrantable condos require non-QM/DSCR.
Wholesale Lender #: A lender that originates loans exclusively through licensed mortgage brokers rather than directly to consumers. Many DSCR lenders operate on a wholesale basis, meaning borrowers must access them through a broker or correspondent channel.

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