DSCR Cash-Out Refinance on a Rental You Have Owned Under Six Months

The Fiirm's DSCR program — our 1-4 unit residential investor loan, underwritten on the property's rent rather than your personal income — will consider a cash-out refinance on a rental you have owned for less than six months. What changes with seasoning is not whether we will look at the file. It is which number we are allowed to call "value."

Under six months of ownership, the appraisal is generally not the number that sets your loan amount. Your cost basis is. That single substitution is what surprises most investors who bought a distressed 1-4 unit, put money into it, and expected the new appraised value to fund the cash-out.

Here is the short version, then the detail.

The short answer

Our DSCR guidelines define two ownership tiers for cash-out LTV, measured to our Note date:

• Owned at least 3 months and up to 6 months. We use the lower of cost basis or appraised value to calculate LTV. There is one exception, covered below, when cost basis exceeds the purchase price by 120% or more.
• Owned more than 6 months. We use the appraised value.

Under three months of ownership, our cash-out LTV restrictions do not define a tier at all. The program's documented route for a property acquired inside six months is delayed financing, which has its own conditions and is priced as a rate-and-term refinance. More on that below.

This is the DSCR page, not the commercial page

Worth separating two things that get conflated constantly. This page is about DSCR: 1-4 unit residential investment property, qualified on debt service coverage. If your property is a mixed-use building, a small apartment building above four units, retail, office, warehouse, or self-storage, that is our SBC program, and its cash-out seasoning rules are written separately. Read [our commercial cash-out seasoning page](/blog/cash-out-refinance-commercial-property-owned-less-than-a-year) for that.

It is also not conventional agency lending. Fannie Mae and Freddie Mac delayed-financing rules — the six-month cash-out seasoning conventions most search results describe — are a different rulebook with different documentation and different occupancy assumptions. Nothing on this page is an agency rule.

What counts as "cash-out" in the first place

Some borrowers assume they are doing a rate-and-term refinance and find out at underwriting that they are not.

That 10% threshold matters because cash-out carries lower maximum LTVs than rate-and-term on our eligibility grid. A file structured to return you "just a little" money can cross the line and reprice.

There is a second definition worth knowing if you bought with cash:

Read that carefully alongside the delayed-financing section below. Free and clear plus more than six months is cash-out. Free and clear plus inside six months is where delayed financing lives.

Cost basis is not your purchase price

When the seasoning tier forces us to the lower of cost basis or appraised value, everything turns on how cost basis is built. It is broader than most investors assume.

Cost basis is inclusive of:

• The purchase price
• Borrower-paid hard and soft costs expended to date, meaning capital expenditures — long-term investments that improve or increase the value of the rental property, such as a new roof or new HVAC. Paid invoices to document CAPEX may be required.
• Customary borrower-paid arm's-length closing costs and fees, including real estate broker commissions, title, escrow, other closing costs, and the amount of taxes, HOA dues, fees, assessments, and liens paid by the borrower or its affiliates in connection with and at the time of the acquisition
• Assignment fees, except that assignment fees greater than 10% of the purchase price will not be considered

What does not count:

• Demolition, removal of debris, fixing lights and outlets, and removal of carpet are not considered CAPEX
• Mortgage broker fees, origination fees, and points are excluded

The practical consequence: if you gutted a property, your invoices are the loan amount. Receipts for a $58,000 roof-and-systems scope are worth more to your file at month four than a strong appraisal is. Contractor invoices that say "renovation" without a scope, cash paid to a crew with no paper, and your own labor all fall out of the calculation.

The 120% exception

There is one written path to using the appraisal inside the 3-to-6 month window, and it is narrower than it first sounds.

So the appraisal can set the LTV percentage, but the cost basis still caps the dollars. You do not get to lend against the lift.

Here is the illustration published in our guidelines, reproduced as an illustration only — your file's numbers, LTV cap, and program adjustments will differ:

Cost basis is $200,000 + $4,000 + $102,000 = $306,000. That is 153% of the purchase price, which clears the 120% test, so the appraised value may be used to calculate maximum LTV. At an assumed maximum allowable LTV of 80%, the appraisal would yield $400,000 — but the maximum loan amount is limited to the cost basis of $306,000.

Note that the 80% figure in that illustration is the guideline's own assumption for showing the arithmetic. It is not a cash-out ceiling. Cash-out maximums are lower, and they are in the next section.

The LTV ceiling sitting above all of this

Seasoning decides what value we use. The eligibility grid decides the maximum percentage of that value. Both apply; the lower answer wins. Maximum cash-out LTV on a standard single-property DSCR loan:

Then the reductions stack. These are the ones that most often hit a recently acquired property, because a property bought four months ago is frequently still empty or still being turned:

• Unoccupied or unleased long-term rental: 5% LTV reduction to the maximum permitted per the eligibility grid, on any refinance transaction. It does not apply to purchases.
• Non-warrantable condominium: 10% LTV reduction, with a maximum of 70% LTV/LTC.
• Short-term rental income used to qualify: maximum 60% LTV for all standard and cross-collateralized transactions.
• Inexperienced investor: maximum 75% LTV/LTC.
• Original lease or new lease with month-to-month terms: limited to 60% LTV.
• Short-term lease under 12 months not listed on any short-term rental website: limited to 60% LTV, and rental history will not be required.
• Student rental with shared common areas: 5% LTV reduction, plus annual lease, parent guarantee, matching lease dates, and proximity to a college or university under 5 miles.

Occupancy has a specific definition here, and partial occupancy is often enough. A property counts as occupied or leased when: a single-family property has one unit occupied; a two-family has two occupied; a three-family has two occupied; a four-family has three occupied. For refinance and cash-out transactions where DSCR is below 1.00, the thresholds are looser: one unit for single-family, one for two-family, two for three-family, two for four-family.

Under three months of ownership

Our cash-out LTV restrictions begin at three months. The guidelines do not publish a cash-out LTV tier for a property owned less than three months, and we are not going to invent one for you here — if you are inside 90 days, that is a conversation with an underwriter about the specific file, not a number you can look up.

What the program does publish for a property acquired inside six months is delayed financing.

Three things about that rule are frequently missed.

It requires that you bought with no financing. The Closing Disclosure has to show no financing obtained for the purchase. If you used a hard money bridge, a private note, a seller carry, or a HELOC secured against the subject, delayed financing is not the path. That is a plain refinance, subject to the seasoning tiers above.

The loan amount cannot exceed purchase price plus closing costs paid at acquisition. Renovation is not in that formula. Delayed financing returns your acquisition capital; it does not monetize the rehab. This is the sharpest difference between delayed financing and the 3-to-6 month cash-out tier, where documented CAPEX does build cost basis.

It prices as rate-and-term. The guideline notes the underwriting model will flag the transaction as a cash-out refinance, but for pricing it is treated as rate-and-term. That is usually to your benefit.

Portfolio and blanket loans use an average

If you are pulling several 1-4 unit properties into one loan, seasoning is tested across the pool rather than property by property.

Note the "for all properties" on both sides. One recently acquired property can pull an otherwise well-seasoned pool onto cost basis, and conversely a group of older holdings can carry a new acquisition onto appraised value. Sequencing which properties go in which blanket is a real lever.

The rules that hit at months 6 through 12

Crossing six months solves the valuation question. It does not remove every seasoning-linked condition.

That closes off the sub-1.00 DSCR columns on the eligibility grid for that window. Separately, for short-term rental income, properties owned at least 6 months but less than 12 months may be considered on a single loan variance basis, with the income calculation at our discretion — that is explicitly case-by-case, not an entitlement.

Documentation that a young file actually needs

Beyond the standard package, the items that decide sub-six-month cash-out files:

Two more constraints on proceeds and reserves worth knowing before you size the request. Cash-out loan proceeds may be used for business purposes only, and all documentation in the file must support and not conflict with the business purpose affidavit. Cash-out may be used for reserves if FICO is above 700. Cash-out proceeds are unlimited at LTV of 65% or below; above 65% LTV, maximum cash out is $1,000,000 for standard or portfolio loan transactions.

What this page does not do

This page does not price your loan. Rate, prepayment structure, and program adjustments are outside what is described here, and prepayment penalties are restricted or prohibited in several states.

It does not tell you what happens under three months of ownership on a leveraged purchase. Our guidelines start the cash-out seasoning tiers at three months and describe delayed financing for unleveraged acquisitions inside six months. Anything else in that window is a file-specific underwriting conversation, and we would rather have it with you than let you plan around a number nobody wrote down.

It does not cover commercial property. Small-balance commercial seasoning is a separate program with separate rules.

It does not decide whether your renovation invoices qualify as CAPEX. The guideline gives the shape of the test — long-term improvements that increase value, yes; demolition, debris removal, minor electrical fixes, and carpet removal, no — but the line between the two on any given scope of work is an underwriting judgment made on the documents you produce.

And it does not guarantee an outcome. Every figure here is a maximum or a condition, and the lowest applicable number governs. Send us the closing disclosure, the invoices, and the lease, and we will tell you the real answer in a day.

Guideline DSCR V28 · Reviewed August 31, 2026

Published August 31, 2026 · Updated August 31, 2026