Investor Glossary

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The vocabulary of investor lending, defined the way underwriters actually use it. Terms are grouped by where they appear in a file rather than alphabetically, because that is how they come at you.

The ratio itself

DSCR

Debt Service Coverage Ratio. Gross monthly rent divided by PITIA. A 1.20 means rent exceeds the payment by 20%.

PITIA

Principal, Interest, Taxes, Insurance, and Association dues. The full monthly obligation. Not to be confused with PITI, which omits HOA.

No-ratio

A program that does not calculate DSCR at all, in exchange for a stronger borrower profile and lower leverage.

Sub-1.0

A program accepting ratios roughly between 0.75 and 0.99 at a rate adjustment.

Global DSCR

The ratio calculated across an entire portfolio rather than a single property. Applied by some lenders to borrowers with large exposure.

Break-even

A DSCR of exactly 1.00. Rent covers the payment with nothing left over.

Leverage and pricing

LTV

Loan-to-Value. Loan amount divided by appraised value. 75% LTV means 25% down.

LTC

Loan-to-Cost. Used on rehab loans — loan divided by purchase price plus renovation budget.

ARV

After-Repair Value. The appraised value once renovation is complete.

Basis point (bps)

One hundredth of a percentage point. 25 bps is 0.25%.

LLPA

Loan-Level Price Adjustment. A rate or fee add-on for a specific risk factor. Conventional investment loans carry their own; DSCR pricing works on the same principle under different names.

Points

Prepaid interest expressed as a percentage of the loan. One point on $400,000 is $4,000, typically buying about 25 bps.

Prepayment penalty

A fee for paying off early. Commonly structured 5-4-3-2-1 or 3-2-1, declining annually.

Yield maintenance

A prepayment penalty calculated to preserve the lender's expected return. Appears on some commercial-grade loans and is usually more expensive than a step-down.

Underwriting

Non-QM

Non-Qualified Mortgage. A loan outside the CFPB's qualified mortgage rules. DSCR is a non-QM product.

Business purpose

A loan for investment rather than personal or household use. This classification is what places DSCR outside consumer mortgage regulation, and it is why occupying the property breaches the note.

Overlay

A lender-specific requirement stricter than the baseline program guideline.

Seasoning

Required elapsed time — of ownership before a cash-out refinance, or of funds in an account before they count as reserves.

Reserves

Liquid funds held after closing, measured in months of PITIA.

Tri-merge

A credit report combining Equifax, Experian, and TransUnion. Lenders use the middle of the three scores.

Condition rating

The appraiser's C1 through C6 assessment. C5 and C6 are not habitable and are not DSCR-eligible.

Warrantable condo

A condominium meeting standard lender criteria for owner-occupancy percentage, single-entity ownership limits, HOA reserves, and litigation. Failing any one makes it non-warrantable.

Appraisal forms

Form 1004

The standard single-unit appraisal report.

Form 1007

Comparable Rent Schedule. Establishes market rent for a single unit from rental comparables.

Form 1025

The 2–4 unit appraisal, including rent analysis for each unit.

Form 216

Operating Income Statement. Sometimes requested alongside the 1025.

Desk review

A second appraiser's review of the original report. Ordered when a value looks aggressive.

Strategy

BRRRR

Buy, Rehab, Rent, Refinance, Repeat. A capital recycling strategy that depends entirely on the refinance returning most of what the purchase consumed.

Cap rate

Net operating income divided by property value. Comparable only against local sales.

NOI

Net Operating Income. Income after operating expenses, before debt service. Unlike DSCR, it deducts vacancy and management.

Cash-on-cash

Annual pre-tax cash flow divided by total cash invested.

Delayed financing

An exception allowing cash-out on a recent all-cash purchase, capped at the original price plus documented costs.

Rate-and-term refinance

A refinance changing rate or term without taking cash out. Generally higher LTV and better pricing than cash-out.

Entity and closing

Vesting

How title is held — individual name, LLC, corporation, or trust.

Personal guarantee

A member's personal promise to repay despite entity vesting. Standard on 1–4 unit DSCR loans.

Recourse / non-recourse

Whether the lender can pursue the borrower personally beyond the collateral.

Bad-boy carve-outs

Exceptions that convert a non-recourse loan to recourse — typically fraud, misappropriation, unauthorized transfer, voluntary bankruptcy, and environmental liability.

Certificate of good standing

State confirmation that an entity's filings are current. Must usually be dated within 30 to 60 days of closing.

Due-on-sale clause

A provision allowing the lender to call the loan if title transfers. Relevant when moving a property into an LLC after closing.

Mortgagee clause

The exact lender name and address that must appear on the insurance binder. Getting it wrong is a routine closing delay.