A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs).

Conventional loans can be conforming or non-conforming.

JUMBO

Jumbo Loans cater to Borrowers who need access to a loan larger than the conforming limit amount for their county.

A jumbo loan is one type of nonconforming loan that doesn’t stick to the guidelines issued by Fannie Mae and Freddie Mac, but in a very specific way: by exceeding maximum loan limits. This makes them riskier to jumbo loan lenders, meaning borrowers often face an exceptionally high bar to qualification — interestingly, though, it doesn’t always mean higher rates for jumbo mortgage borrowers.

As a reminder, be careful not to confuse jumbo loans with high-balance loans. If you need a loan larger than $806,500 and live in an area that the Federal Housing Finance Agency (FHFA) has deemed a high-cost county, you can qualify for a high-balance loan, which is still considered a conventional, conforming loan.

In 2025, mortgage loans for single-family homes are limited to $806,500, HOWEVER, higher-cost areas like Hawaii, Alaska, and certain areas all over the USA, like Orange County California for example, have limits up to $1,209,750 (which is a 150% bump due to the average cost per home in the area). High-Balance Loans are an important factor to consider when searching for an area where you want to live.

SUPER JUMBO

A super jumbo mortgage is a jumbo mortgage that far exceeds the conforming loan limits, often used for high-value properties in more costly real estate markets. Super jumbo loans typically range from $3-5 million to $30 million and more. Super Jumbos are designed to finance luxury properties in highly competitive local markets.

Unlike Jumbo loan limits, the super jumbo mortgage category is not directly defined, controlled, or regulated by any of the aforementioned agencies. Instead, these specialized lenders internally and independently define their own parameters and criteria for what defines a Super Jumbo mortgage. This can depend on the location with the United States the type of home and are usually for luxury homes. Thus, what actually constitutes a Super Jumbo mortgage is subject to each individual lender’s rules, and subject to their own internal investment criteria.

With Super Jumbo loans, one should expect lower Loan-to-Value limits, higher credit score requirements, multiple appraisals, more stringent income or asset verification, deeper background checks and private underwriting. One requirement all Super Jumbo lenders share is expected: You must be wealthy.

At CORE, we enjoy lending on manufactured homes, and we’re skilled at delivering good loans for our Clients. We offer conventional, VA, FHA and FHA-HECM reverse mortgages on manufactured loans.

To qualify for an FHA Loan on a manufactured home, there are some specific property guidelines worth mentioning:

Construction

• Be built after June 15, 1976
• Have a living area of at least 400 square feet
• Have a permanent foundation built to FHA criteria
• Have a HUD seal on each section

Safety

• Be structurally sound and free of health and safety hazards
• Have a properly graded foundation and intact roof
• Have properly secured entrances and windows

Location

• Be permanently attached to the land
• Must be the original and only land the manufactured home is attached to
• Have access to qualifying water and sewer facilities
• Have all-weather access
• Be located on a site that meets local standards for site suitability
• Be located on a site that has adequate water supply and sewage disposal facilities

Other requirements

• Be classified as real estate
• Have a mortgage that covers both the manufactured unit and its site
• Have a foundation inspection that meets the standards of the Permanent Foundations Guide for Manufactured Housing
• Meet relevant state and local requirements

CORE specializes in DSCR loans.

First, know there is a difference between an “Investment Property” loan and a “DSCR” loan. Please see DSCR Loans for a detailed description and how they work.

An Investment Property loan is simply a type of loan for properties that aren’t the owner’s primary residence, while a DSCR loan is a type of loan that focuses on a property’s cash flow.

So the bottom line is that Investment Property loans have more traditional underwriting methods.

A simple example of an Investment Property loan is Martha, who owns her primary residence and wants to buy the house next door and rent it to a friend.

DSCR loans are based on the property’s ability to generate income, so the loan terms can be more flexible. Lenders use the DSCR to determine if the property can cover its monthly obligations. A higher DSCR means the property generates more income than it needs to pay its debts, which is favorable to lenders.

When DSCR loans are useful?

DSCR loans can be a good option for:

• Investors who don’t have W-2 income
• Investors who want to buy properties in an LLC
• Investors who want to finance multiple properties at once
• Investors who need flexible loan terms
• Investors who want a faster approval process and a quick closing

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The Department of Veterans Affairs (VA) offers loan programs to help servicemembers, veterans, and their families buy homes. CORE is passionate about fully participating in the VA home loan program.

The VA sets the rules for loan qualification, arranges the terms under which mortgages may be offered, and guarantees any loan made under the program. Some VA loans are available with no down payment.

Pros/Cons of a VA Loan

Some of the advantages of a VA loan include the ability to buy a home with no down payment (as long as the sales price doesn’t exceed the appraised value), and no private mortgage insurance (PMI) requirement. VAguaranteed home loans are available for manufactured homes, though maximum loan amounts vary. The VA loan program also limits the closing costs you may be charged and gives you the right to prepay your mortgage without a penalty. Also, the VA may be able to offer you some assistance if you run into temporary financial difficulties.

There may be disadvantages to a VA loan. For example, a VA loan may or may not have a higher interest rate than a conventional loan, although interest rates on VA loans are negotiable. In addition, most borrowers are required to pay a VA loan funding fee (currently between one and three percent of the amount of the loan), which means VA loans typically cost more than a conventional loan.

Eligibility

The VA can help you determine your home loan benefit and issue your Certificate of Eligibility (COE). If you have already bought and sold one home that was financed through a VA loan, your eligibility can generally be restored. Because of the Veterans’ Benefits Improvement Act of 2008, veterans who would like to refinance their existing non-VA mortgages into a VA loan may be eligible to do so for up to 100 percent of the value of the property. This may allow you to lower your total monthly household expenses.

Spousal status is evaluated the same for all borrowers. If you are applying for a VA loan with a co-borrower who is not your spouse, you could face different loan underwriting requirements than veterans who apply for a VA loan with their spouse.

Many veterans and current servicemembers can access their eligibility certification online:

https://www.va.gov/housing-assistance/home-loans/how-to-request-coe/

Registration is free, immediate and provides information on many benefits for servicemembers, veterans, and their families. With your COE, you have evidence that the VA will “stand behind” your loan. This VA guaranty is certainly considered by the lender, but VA loans are underwritten, closed, and serviced entirely by private lenders, not by the VA. Servicemembers and veterans must go through the application process and provide information related to repayment ability, just like any other loan applicant.

VA FAQs

What is the maximum loan amount VA will guarantee?

VA does not have a maximum loan amount. It is understood that lenders must generally have at least 25% of the loan guaranteed by VA to sell the loan on the secondary market. Based on this factor the following limits may apply:

Refinance Loan Types Limit
Purchases or construction * $417,000 including VA’s Funding Fee
Regular or Cash Out * $144,000 including VA’s Funding Fee
Interest Rate Reduction VA will guaranty 25% of the final loan amount as long as it is in compliance with VA regulations

* Please Note: The entitlement amount will increase as needed to keep up with loan amounts specified by Freddie Mac for single family residences. The guaranty will not exceed 25%. This does not apply for regular (or cash out refinances.)
* It is suggested that any deviations on loan amounts for purchases or construction and regular or cash-out refinances listed above be discussed with your secondary mortgage market representative prior to closing to ensure that you have the proper coverage needed to satisfy your investor’s requirements.

Specifics on loan amounts and guaranty percentages can be found in Chapters 3, 6 and 7 of the VA Lender’s Handbook.

Can a Veteran purchase a home with his fiancée using a VA loan?

The Veteran can purchase a home with any individual s/he chooses but VA will only guarantee the portion of the loan attributed to the Veteran and a spouse.

For example, if the Veteran intends to purchase a home with his fiancée prior to marriage and will share the same interest in the property, VA would guarantee half of the loan.

What is the maximum guaranty on a joint loan for two Veterans?

The loan amount and guaranty percentage would be the same as for one Veteran. The use of two certificates does not mean you can double the guaranty or loan amount.

Can a Veteran refinance over the 90% LTV on a cash out refinance?

The loan amount may not exceed 90% of the appraised value (referred to as the base loan amount) plus the VA funding fee. For example, the maximum loan amount for a home with an appraised value of $115,000 would be:

$103,500:Base loan amount at 90% of the appraised value
+ $ 2,225.25: VA Funding Fee (e.g. 2.15% for first time use Veteran, $2,225.25)
$105,725: Maximum loan amount

It is understood that the loan amount may not exceed $144,000 to sell the loan on the secondary mortgage market. The exception to this is an addition for an Energy Efficient Improvement Loan (EEI). For EEI mortgages, the loan amount may be increased by the cost of the energy conservation improvements up to $6,000.

How do you process a loan for a Veteran who has been rated incompetent?

• Obtain proof that the person signing the documents for the Veteran is authorized.
• Obtain VA Form 26-8937, Verification of VA Benefits.
• Submit a complete package (including a NOV) to VA for review and acceptance prior to the closing.

Does VA require a 2.4% funding fee if the borrower is currently in the Reserves or National Guard but the Veteran has a green certificate?

If the Veteran possesses a valid green certificate, it was obtained because s/he served full time active duty and is subject to the lower funding fee.

The fact that a person is in the Reserves or National Guard presently does not mean they automatically have to pay the higher funding fee. They may have qualified for the benefit as a Veteran with full time active duty service previously. Reserve/National Guard certificates are clearly annotated as such and list the fact that the Veteran is subject to a higher funding fee on the certificate. Any unusual scenarios may be clarified with your Regional Loan Center or questionable certificates may be addressed with the Atlanta Eligibility Center.

Information concerning VA Funding Fee may be found in Chapter 8 of the VA Lender’s Handbook.

What documentation is acceptable to establish exemption from the VA Funding Fee?

• VA Form 26-8937, Verification of VA Benefits, completed and signed by VA.
• A current award letter dated within the past 12 months
• Letter from the Veteran Service Center Manager confirming the extension of compensable service connected disability income.
• Proof that the Veteran elected to receive service retirement pay in lieu of VA compensation, such as a copy of the original VA notification of disability rating and proof of receipt of retirement income.
• A Certificate Of Eligibility (COE) which indicates that the borrower is eligible for VA benefit as an unmarried surviving spouse as stated on the COE.

If a Veteran purchased a home with a VA home loan, paid off the loan and had entitlement restored, is s/he considered a multiple user?

Yes, s/he is considered a multiple user and subject to a higher funding fee unless exempt. Additionally, if the benefit was used before and the borrower is using remaining entitlement to purchase another home, s/he would be subject to a higher funding fee.

Information on funding fees can be found in Chapter 8 of the VA Lender’s Handbook

How many properties can a Veteran own through VA?

A Veteran can reuse the VA benefit multiple times as long as s/he has sufficient benefit to cover the new loan. In addition, the new home purchased must be the primary residence.

Is an off-base housing authorization required for Veterans currently serving in the Armed Forces to process a loan package?

No, the DD 1747 is no longer required by VA.

Will VA accept a partial package for credit approval prior to the appraisal being ordered?

No. VA requires a complete loan package to underwrite a loan for commitment. A complete list of required package content is contained in Chapter 5 of the VA Lender’s Handbook.

Where can I find information about lender approval, automatic authority or agents?

Chapter 1 of the VA Lender’s Handbook contains all of the requirements lenders must follow to be approved and participate in our program. The VA Lender’s Handbook can be viewed or downloaded from our site at http://www.benefits.va.gov/warms/pam26_7.asp.

Can you give a mortgage for an Interest Rate Reduction Refinance Loan (IRRRL) when the Veteran no longer occupies the property?

Yes, prior occupancy of the property is sufficient. The IRRRL is the only VA loan where the Veteran or his spouse does not have to occupy the property as a primary residence when the new loan closes. Specifics on occupancy requirements can be found in Chapter 3 of the VA Lender’s Handbook.

Is there any exception to the 10-year rule for Interest Rate Reduction Refinance Loans (IRRRLs)?

In general, the new term for an IRRRL may not exceed the term listed on the note of the original loan being paid in full by more than 10 years. The Graduated Equity Mortgage (GEM) loan is the only exception. If a GEM loan was amortized over a longer period than the term indicated on the original note, the lender may base the term of the IRRRL over the GEM amortization period. A copy of the note showing the payment schedule would have to be obtained to document this.

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Debt Service Coverage Ratio (DSCR) Loan:

Use Rental Income to Qualify for Investment Properties.

A DSCR loan allows real estate investors to secure financing based on the rental income of a property rather than their personal income. If you cannot qualify for a conventional loan, DSCR loans are a great option.

• Accessible for real estate investors
• Unlimited Cash Out
• No Limit on the number of properties
• All types or rentals are eligible

What is a DSCR loan?

A DSCR (Debt Service Coverage Ratio) loan, or “Investor Cash Flow Loan,” is a non-QM loan that allows you to qualify for a home loan without relying on personal income, or using your tax returns. As a real estate investor, you can avoid high rates and high points of private loans, lengthy approval processes, and strict lending criteria with a debt service coverage ratio loan, which is a type of no-income loan. Qualify for a loan based on your property’s cash flow, not your income.

(As a reminder, traditional mortgages backed by organizations like Fannie Mae and Freddie Mac, or government programs like FHA, VA, and USDA, have specific requirements related to income, credit, and job stability. But what do homebuyers do if they don’t meet these criteria? Non-Qualified Mortgage loans (“Non-QM” loans) can be the solution.

Non-QM loans are mortgages that offer their own set of criteria, often including more flexible income and credit requirements. These fall outside traditional criteria set by the Consumer Financial Protection Bureau (CFPB) and therefore cannot be backed by Fannie Mae, Freddie Mac (aka “conventional loans”), or government institutions. In exchange for expanded qualification opportunities, borrowers may need to pay a higher interest rate or make a larger down payment.

DSCR loans are perfect for real estate investors who can secure a real estate loan based on their rental property’s cash flow, not their income tax returns or other financial paperwork. Here’s how a DSCR loan works and what it takes to qualify.

How does a DSCR loan work?

A conventional loan requires proof of income, usually in the form of tax returns or pay stubs. Alternatively, DSCR loans allow buyers to qualify for a mortgage based on their rental property’s cash flow.

Instead of using income to qualify a real estate investor for a loan, mortgage lenders will look at what is called a debt service coverage ratio or DSCR ratio. This ratio gives lenders insight into whether or not a borrower will be able to use the rental income from the property to cover their monthly loan payments.

In addition to the DSCR ratio, investors may also have to meet certain credit score requirements or even offer a down payment, though the exact requirements vary between lenders.

There is no limit to the number of DSCR loans you can qualify for. This means that investors who own multiple real estate properties can take out multiple loans to generate income from many tenants. This feature makes this a flexible option for beginner investors as well as seasoned real estate professionals.

The DSCR Ratio:

To qualify for a DSCR loan, lenders require you to have a healthy DSCR ratio. This ratio relates the income of the property to its total debt, which influences the eligibility for the DSCR loan.

A good DSCR ratio is usually one or above, though lenders can be flexible depending on other criteria. To calculate your DSCR ratio, simply use the following DSCR formula:

DSCR = Monthly Rental Income / PITIA (Principal, Interest, Property Taxes, Homeowners Insurance & Association Dues)

DSCR Formula Calculation

The debt service coverage ratio measures a property’s annual gross rental income against its annual mortgage debt, including principal, interest, taxes, insurance, and HOA (if applicable). Lenders use DSCR to analyze how much of a loan can be supported by the income coming from the property and to determine how much income coverage there will be at a specific loan amount. This is the basic formula for calculating the DSCR Ratio:

Better shown:

How to Calculate DSCR

The debt service coverage ratio measures a property’s annual gross rental income against its annual mortgage debt, including principal, interest, taxes, insurance, and HOA (if applicable). Lenders use DSCR to analyze how much of a loan can be supported by the income coming from the property and to determine how much income coverage there will be at a specific loan amount. When calculating DSCR, lenders do not take into certain account expenses.

Step 1:

To find your gross rental income, we take your annual rental income based on your lease agreement and the appraiser’s comparable rent schedule (form 1007) and use the lesser of the two. In some cases, if you can prove a twelve-month history of LTR or STR rental income, you can qualify off that rather than the appraiser’s market rent.

Step 2:

Next, you’ll need to find your annual debt. Your annual debt for loan qualification purposes equals the total annual principal, interest, taxes, insurance, and HOA (if applicable) payments. Annual Debt = Total Annual PITI payments.

Step 3:

Next, you’ll divide your annual gross rental income by your annual debt for your ratio. DSCR = Annual gross rental income/Annual debt.

*** Please Note that net operating income (NOI), capitalization rate (Cap Rate), cash on cash return (COCR), and return on investment (ROI) are not considered for DSCR mortgage loan qualifying purposes.

Example of Debt Service Coverage Ratio Calculation

A real estate investor might be looking at a property with a gross rental income of $50,000 and an annual debt of $40,000. When you divide $50,000 by $40,000, you get a DSCR of 1.25, which means that the property generates 25% more income than what is necessary to repay the loan. This also means that there is a positive cash flow in the lender’s eye.

How to Improve Your DSCR

Improving your DSCR before applying for a loan can increase your chances of approval and the amount you qualify for. Here’s how you can optimize your DSCR to make yourself more qualified when applying:

Increase rental income:

Boost your rental income by optimizing your property’s occupancy rates, increasing rental rates in line with market trends, or offering additional services or amenities to attract more tenants. Minimize vacancies by implementing effective marketing strategies, maintaining properties in good condition to attract and retain tenants, and quickly addressing tenant concerns or issues.

Refinance existing loans:

Explore opportunities to refinance existing loans at lower interest rates with longer repayment terms and consider adding an interest-only feature. Refinancing your existing mortgage reduces your monthly debt service obligations and improves your DSCR.

Increase property value:

Invest in property upgrades or renovations to increase its market value, allowing you to command higher rental rates and improve your overall financial position. Upgrades can also help attract tenants, helping you increase your rental income by reducing vacancies.

Manage your expenses:

Implement cost-saving measures like energy-efficient upgrades, outsourcing maintenance services, or renegotiating vendor contracts to reduce operating expenses. The lender does not consider expenses when calculating your DSCR but this will help you improve your overall cash flow.

Advice:

If you’re a potential investor trying to increase the DSCR ratio, consider looking into two-to-four unit properties.

With a single-family residence “(SFR”) -especially if you’re looking at purchase prices over $400,000; meeting the 1:1 ratio can be difficult with only 20% down. From my experience, look for two, three, and especially four-unit properties, because multiple unit properties will DSCR and cash flow much better than single family residences. So, if you’re looking at purchase prices over $400,000, and you want to keep your down payment lower, look at the multi-family units.”

Who are they for?

A DSCR loan is one of several types of home loans referred to as Non-QM loans. Non-QM loans provide potential borrowers with an alternative route to financing, which doesn’t require traditional income verification methods. A DSCR loan, in particular, makes it easier to show rental income that might not show up on your taxes due to deductions for legitimate business expenses.

A DSCR loan is a strong Non-QM loan for real estate investors. Lenders can use a DSCR to help qualify real estate investors for a loan because it can easily determine the borrower’s ability to repay without verifying personal income.

When it comes to Non-QM mortgages, DSCR loans are one of the most popular options among all borrowers. In fact, between 2018 and February 2023, DSCR loans accounted for approximately half of the 201,000 Non-QM loans rated by S&P Global.

A DSCR loan enables real estate investors to get a loan because it takes into account cash flow from investment properties rather than pay stubs or W-2s, which many investors do not typically have. Lenders use DSCR to evaluate a borrower’s ability to make monthly loan payments.

Deductions from properties may lower taxable income, making it hard for investors to prove their true income. Lenders use DSCR to determine whether someone can make loan repayments. Otherwise, many investors might struggle to meet the basic eligibility standards for real estate loans.

Since they don’t require pay stubs or tax returns showing minimum income levels, debt service coverage ratio loans are a great alternative for investors who claim many write-offs and business deductions.

DSCR loans are for investors in residential real estate rentals. They are a great option for first time investors and experienced investors with a large existing portfolio.

Investors can use DSCR loans to purchase additional income-generating properties, which makes this an ideal loan type for those looking to tap into additional revenue streams.

A DSCR loan is a type of Non-QM loan, or non-qualified mortgage loan. These are loan products tailor-made for borrowers who may not fit the usual criteria for a traditional mortgage. These loans tend to have different requirements when it comes to income and credit.

In addition to providing loans for real estate investors, Non-QM loans have solutions for self-employed borrowers, gig workers, or foreign nationals. They include:

• DSCR Loans
• Bank Statement Loans
• ITIN Loans
• 1099 Mortgage
• Foreign National Loans
• Asset Qualifier Mortgage
• Full Doc Loan
• P&L Loan
• WVOE Loan

How to qualify for a DSCR loan

To qualify for a DSCR loan, lenders have specific criteria for both you and the property in question. Here are the DSCR loan requirements borrowers must meet.

DSCR loan requirements

Lenders will start by confirming the borrower’s ability to repay the loan. While specific requirements vary by the lender, most borrowers can expect to meet the following criteria:

• DSCR ratio of 1.0 and above
• Credit scores 660 and above are typically required
• A down payment of 10%-30% are typically required
• A minimum loan amount of $100,000 or higher is typically required.
• A maximum loan amount of $3M to $5M is common.

Again, these requirements vary between lenders, and some may be willing to work with borrowers with different credit histories depending on the property.

In addition, lenders may also vary on the minimum and maximum loan amounts, but keep in mind that since DSCR loans are aimed at income-generating properties, you may find a narrower range than in a conventional mortgage loan.

Property Eligibility

As for the property itself, the lender’s primary concern is that it generates enough income to cover its debt. That said, DSCR loans are reserved for investment properties that generate income, whether a single-family unit or multi-unit structure.

In the past, lenders have restricted loans to structures of four units or less. But more recently, lenders have granted loans to larger, multi-unit properties.

Specifically, lenders will look at the following:

• A loan-to-value (LTV) ratio of 80% or lower.
• An appraisal report assessing the property’s value.
• Additionally, lenders typically expect an LTV of 80% or lower, which means that the loan can’t be any more than 80% of the appraised value. That is why the property must be professionally appraised prior to the approval of the loan.

Pros and cons of a DSCR loan

While DSCR loans are a great option for real estate investors, it’s important to weigh the pros and cons whenever you take out a loan. Here are the advantages and disadvantages of DSCR loans.

Pros

On the plus side, DSCR loans offer borrowers the following advantages:

• Easier to qualify for compared to conventional loans, requiring no proof of income
• Require less documentation compared to conventional loans
• Faster processing time for loan approval
• No limit on the number of DSCR loans — ideal for multi-property owners
• Jumbo loans available for high-end real estate properties
• Lenders also offer flexible loan terms so that borrowers can customize their mortgage payments.

Cons

Despite these advantages, there are some drawbacks to DSCR loans. For starters, it’s important to remember that DSCR loans are aimed at investors, which may make them inaccessible to other types of borrowers.

Additional drawbacks include:

• Higher down payment requirements, usually 20% or higher
• Some lenders may have high credit score requirements
• DSCRs are limited to income-generating properties
• Most DSCR loans come with prepayment penalties
• Additionally, DSCR loan eligibility assumes that the property has a good DSCR ratio of 1.0 or higher, which may not apply to all properties.

Also, it’s important to remember that your cash flow depends on having tenants occupying your rental property. Vacancies can hinder your cash flow, which may limit your ability to repay your mortgage debt obligations.

Real estate investing offers the promise of great gains for the right investor. As long as you keep the property occupied with responsible tenants, you’ll have a reliable income stream that can pay off your loan and generate revenue.

DSCR loans are ideal for investors who might otherwise lack the documentation needed for a conventional mortgage loan.

CORE MORTGAGE specializes in DSCR loans. We have multiple lenders and programs for many scenarios. We offer flexible loan terms and low interest rates. We work with our clients to find a program that best aligns with your investing goals.

DSCR KEY TAKEAWAYS:

• The debt service coverage ratio (DSCR) is a number that measures a property’s current rental income compared to its debt obligations. A DSCR above 1.0 indicates positive cash flow, while a DSCR below 1.0 indicates negative cash flow.
• A DSCR loan allows a borrower to qualify for financing based on the projected rental income of a property rather than personal income.
• DSCR loans are designed for real estate investors and can only be used to purchase income-generating properties. DSCR loans can’t be used to buy a primary residence or a fixer-upper.

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