A student rental is financeable on our DSCR program, but only if the lease structure meets four conditions at once: every lease is annual, every lease carries a parent guarantee, all the leases run on the same start and end date, and the property sits less than 5 miles from a local college or university. Meet all four and the property is permitted with a 5% reduction in the maximum LTV you would otherwise get from the eligibility grid.
That is the whole provision — four lines in the guideline. Almost everything that goes wrong on a student-rental file goes wrong because one of them was treated as a preference rather than a condition. This page explains each one precisely, what it means for by-the-room leasing versus a whole-house lease, how the 5% cut lands on real numbers, and the timing problem that catches landlords refinancing in summer. It also says where the guideline is silent, because on this subject it is silent in places that matter.
The four conditions, exactly as written
The student-lease treatment lives under Other Types of Leases, in the same block that governs short-term leases and fully furnished properties.
Read the first clause carefully. The permission runs to properties leased to students sharing a common area — living area, kitchen and entryway are the named examples. This is not a general "student housing" rule; it is a rule about a residence where the private space is a bedroom and the rest of the house is common.
The word "ALL" is in the source text. There is no partial credit: a property 3 miles from campus with staggered lease dates does not qualify, and neither does one with perfectly coterminous leases 6 miles out.
By-the-room leasing versus a whole-house lease
The guideline never uses the phrase "by the room." It describes the situation — students sharing common areas — then requires that all leases have the same start and end date. The plural is the tell. A single whole-house lease has nothing to be coterminous with; the requirement only has work to do when there is more than one lease on the same dwelling unit, which is what by-the-room leasing produces.
The practical effect is that a set of room leases must behave, in aggregate, like one lease on the whole unit: same start, same end, no rolling turnover. The guideline does not say that in those words; it states the requirement and leaves the reasoning to you.
That reading matters because of a general rule one section above. Every lease used on a DSCR file must cover 100% of the square footage of the applicable residential unit. A bedroom-only lease plainly does not. The student provision is the accommodation that lets shared common areas exist inside the lease structure at all — and the coterminous condition is what keeps a set of room leases from drifting into something the 100% rule would reject.
There is a hard boundary underneath all of this. Single Room Occupancy (SRO) properties are an ineligible property type, full stop. By-the-room leasing of an ordinary house with shared common areas is what the student provision contemplates; a property configured and operated as an SRO is not eligible regardless of who the tenants are.
The distance condition: less than 5 miles
The condition is that the property "must be located close to or near a local college/university (<5 miles)." Two things are worth pinning down.
First, the operator is less than, not "5 miles or less." A property measured at exactly 5.0 miles is not inside the condition as written.
Second, the guideline does not say how distance is measured — straight-line or driving, from which point on a multi-building campus, using what source. Nor does it define "local college/university"; whether a community college, satellite campus or trade school counts is not addressed anywhere in V28. We are not going to invent a measurement standard. If your property sits comfortably inside the radius by any reasonable method, this is not your problem; if it is close to the line, raise it before you order the appraisal.
The parent guarantee: what the guideline says and what it does not
The requirement is one clause: "Lease must be annual and include parent guarantee."
That is the entire treatment. So here is the honest scope of it.
What the guideline requires: the lease includes a parent guarantee. On a by-the-room structure the requirement is written against "the lease" while the surrounding conditions are written against "all leases" — the safe reading, and the one to build your file on, is that each lease in the set carries one.
What the guideline does not address: it prescribes no form of guarantee, and requires no credit report, FICO score, income documentation, net worth statement or asset verification from the parent. It sets no minimum number of guarantors per lease, does not say what happens when a student has no parent available to sign, and does not address guardians, sponsors or third-party lease-guarantee services.
We are not going to fill those gaps with a plausible-sounding procedure. If your situation falls into one of them, it is a question for underwriting on the specific file.
One distinction is worth stating clearly, because it is the most common confusion on these files.
The parent signs the lease. The 660 FICO minimum, the credit report, the background search and the recourse guaranty attach to the people behind the borrowing entity — not to tenants' parents.
The lease term trap: an academic year is not an annual lease
This is the condition that costs people the most money, and it is arithmetic rather than judgment. The provision requires the lease to be annual. Much of student housing runs on a 9- or 10-month academic-year term. That is not annual, and a 9-month lease does not fall into a gentler category — it lands in the adjacent rule:
So a 9-month academic-year lease on a property 2 miles from campus is not a 5% haircut. It is a 60% LTV cap. On a $600,000 house, the gap between a 75% purchase LTV and 60% is $90,000 of additional down payment.
There is a ceiling on the other side: the program permits no leases with a term of 3 or more years. The usable window is 12 months up to just under 36 — in practice, a 12-month lease, renewed.
Month-to-month is its own bucket and also expensive. An original lease or a new lease with month-to-month terms is limited to 60% LTV. A house that turns over informally between roommates through the summer, with no annual document, is a 60% LTV file.
The 5% LTV reduction on real numbers
The reduction is stated as a flat condition: the property "will require a 5% reduction in LTV." It is not a maybe. Below are the published single-property maximums for DSCR of 1.00 or greater on loan amounts up to $1,500,000, with the 5% student reduction applied.
| Minimum FICO | Units | Purchase / rate-and-term max LTV | After student cut | Cash-out max LTV | After student cut |
|---|---|---|---|---|---|
| 700 | 1-4 | 80% | 75% | 75% | 70% |
| 680 | 1-4 | 80% | 75% | 70% | 65% |
| 660 | 1 unit only | 75% | 70% | 65% | 60% |
Two features of that grid catch student-rental borrowers specifically.
The 660 row applies to 1 unit only. A borrower at 660 to 679 cannot use the 2-4 unit column at all — and student rentals are frequently duplexes and triplexes near campus. The units column is a gate, not a footnote.
Above $1,500,000 the grid steps down again: at a $2,000,000 loan amount the 700-FICO purchase maximum drops from 80% to 75%, and the 660 single-unit purchase maximum from 75% to 65%. Apply the student cut to the correct row, not the headline row.
Purchase and rate-and-term maximum LTV after the 5% student-lease reduction, loans up to $1,500,000, DSCR 1.00 or greater.
Summer, the appraisal, and the occupancy definition
Coterminous leases have a side effect nobody plans for: a shared vacancy window. If every lease runs August 1 to July 31, the property is occupied year-round and this section does not apply to you. If they run August to May, you have a property that is demonstrably empty in June.
The program defines occupancy by unit count:
| Property type | Units that must be occupied to count as Occupied/Leased |
|---|---|
| Single-family | 1 |
| Two-family | 2 |
| Three-family | 2 |
| Four-family | 3 |
A property below the threshold is Unoccupied/Unleased, and unoccupied long-term rentals take a 5% LTV reduction to the eligibility-grid maximum on any refinance transaction. The unit must be in lease-ready condition if vacant. The timing rules around this are unforgiving:
- On a newly signed lease, if the unit is not occupied at the time of the inspection, the unit will be considered vacant and a 5% LTV cut may apply.
- Re-inspection to verify occupancy will not be acceptable.
- A lease signed after the appraisal report inspection will not be acceptable, and the unit will be deemed vacant.
There is a further layer: DSCR below 1.00 is not permitted for vacant properties, and 2-4 unit properties must have at least 50% occupancy. A cash-out on an empty summer triplex is not a pricing conversation; it is an eligibility problem.
The rent you get credit for
By-the-room rent rolls often total more than what an appraiser will call market rent for the house as a whole. The program caps how much of that upside you can qualify on.
Gross rent used in the DSCR calculation comes from the lesser of the lease agreement or the Appraisal Form 1007, with one exception: when the lease is higher than the appraisal's gross market rent, the qualifying amount cannot exceed 10% over the market rent on the appraisal. If actual rent is above market but within that 10%, the lease amount can be used.
The guideline's own example: actual rent per lease of $1,200 against market rent per appraisal of $1,000 gives an allowable qualifying amount of $1,100 — the 10% ceiling, not the $1,200 you collect. Where actual rent of $1,050 sits against $1,000 market, the full $1,050 is usable.
On purchases the calculation is simpler and less generous to a strong rent roll: obtain Appraisal Form 1007 and use 100% of the gross market rent. The seller's by-the-room performance does not carry over.
Who is allowed to be the tenant
Buying a house near campus and leasing a room to your own child does not work on this program: a lineal descendant of a guarantor is not an eligible tenant. Separately, all loans must be business purpose only and certified as such, no property may be occupied by any borrower or guarantor, and the listed occupancy red flags include a subject property that could reasonably function as a second home — precisely how a parent-owned house at a university reads on paper.
Tenants must be natural persons; exceptions for other entity types may be considered case by case. Rent-to-own and contracts for deed are ineligible outright.
The college-town problems that have nothing to do with students
Several rules hit campus-adjacent properties disproportionately. Check them before you spend money on an appraisal.
Rural locations are not permitted — as defined by the CFPB designation website, or as identified as rural on the appraisal. Plenty of state and land-grant universities sit in counties carrying that designation. This is a knockout, not an adjustment.
Properties over 2 acres are ineligible. Older houses on the edge of a campus town often sit on large lots.
Geographic exclusions. The DSCR product is not available for properties in the Baltimore-Towson MSA, or in certain areas of Philadelphia and Newark, New Jersey.
Minimum square footage: 700 sq ft for a 1-unit property, 500 sq ft for a condominium, 400 sq ft per unit on a 2-4 unit. All units must have a functioning kitchen and bathroom.
2-4 unit properties with FICO of 740 or below require a DSCR of at least 1.00. Most student duplex and triplex buyers are in that band.
Self-management. To manage the property yourself you need two years of experience managing income-producing property, or a certification or equivalent coursework in property management. New managers — under two years — are permitted with a 700 minimum FICO. Student rentals are management-intensive, and this is often why a first-time landlord near a campus ends up with a property manager on the file.
Inexperienced investors are permitted with their own set: minimum DSCR of 1.00, maximum LTV of 75%, maximum loan of $1,000,000, must currently own a primary residence for at least one year, blanket mortgages not permitted, first-time homebuyers not eligible.
Reserves are 3 months of PITIA at DSCR of 1.00 or greater, and 6 months below 1.00.
Where purpose-built student housing goes instead
Everything above is the 1-4 unit investor program, and the commercial side moves in the opposite direction on the by-the-room question. Our small balance commercial guidelines list traditional student housing among the ineligible property types, with a conditional path: it may be eligible in some cases as multi-family, but rent must be per unit rather than per bed, and leases must be annual. That multi-family definition requires five or more dwelling units, every unit with a full and legal kitchen, and units rented on a non-transient basis such that tenants consider the unit their permanent residence. So the per-bed rent roll the 1-4 unit program accommodates is exactly what the commercial program requires you to convert to a per-unit structure. The annual lease is the one thing both documents agree on.
What this page does not do
This is a guideline explainer, not an approval, a quote, a rate sheet or a commitment to lend. Nothing here prices your loan.
It does not tell you your maximum LTV. The grid figures above are program maximums before file-specific adjustments, and the interaction between the student-lease reduction and others is not resolved in the guideline text.
It does not supply a parent-guarantee form, a distance-measurement standard, a definition of "student," or documentation requirements for a lease guarantor — the guideline sets none of those out, and we are not inventing them.
It does not address the downstream file: appraisal ordering, the 1007 rent survey, title, insurance, prepayment penalty structure by state, entity formation, or the closing timeline.
It does not answer legal, tax, zoning or licensing questions. Whether by-the-room leasing is permitted under your municipality's occupancy ordinance, whether your city caps unrelated occupants per dwelling, and how a lease guarantee is enforced in your state are questions for your attorney and your local code office.
Guideline content on this page reflects DSCR V28 and the small balance commercial guidelines effective 8/3/2026. Program terms change.
Guideline DSCR V28 · Reviewed August 31, 2026
Published September 1, 2026 · Updated September 1, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.