The Debt Service Coverage Ratio (DSCR) guidelines for Access Non-QM, Edge Non-QM, and Foreign National DSCR were recently updated. For the topic revisions identified in the table below, the EFFECTIVE DATE has been amended to now apply to new loans registered on or after August 26, 2024. Previous communications indicated an earlier effective date.
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Access & Edge DSCR |
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Topic |
Previous Guideline |
New Guideline – 08/26/24 |
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First Time Investors
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First Time Investors allowed on a purchase transaction with a minimum 680 credit score down to .75 DSCR (Access) or .80 DSCR (Edge). |
First Time Investors allowed on a purchase transaction with a minimum 680 credit score down to 1.0 DSCR (Access and Edge). |
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Family Members as Tenants |
Silent |
If the tenant of the subject property is a family member of the borrower, the transaction is not allowed. |
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DSCR Calculation
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Long-Term Rental Income – Refinance On refinance transactions, the higher 12-month lease agreement amount may be used with evidence of two (2) months history of timely receipt and the lease agreement amount may not be greater than 125% of the market rent from the 1007/1025. |
Long-Term Rental Income – Refinance On refinance transactions, when the lease agreement is greater than the 1007/1025, the lower of the lease agreement or 120% of the 1007/1025 market rent may be used with three (3) months current proof of receipt of the higher rental income. |
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DSCR Documentation |
Silent |
Short-Term Rental Income – Refinance When qualifying a DSCR refinance transaction with short-term rental income, evidence that the property is actively listed as a short-term rental is required. |
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Foreign National DSCR |
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Topic |
Previous Guideline |
New Guideline – 08/26/24 |
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DSCR Calculation
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Long-Term Rental Income – Refinance On refinance transactions, the higher 12-month lease agreement amount may be used with evidence of two (2) months history of timely receipt and the lease agreement amount may not be greater than 125% of the market rent from the 1007/1025. |
Long-Term Rental Income – Refinance On refinance transactions, when the lease agreement is greater than the 1007/1025, the lower of the lease agreement or 120% of the 1007/1025 market rent may be used with three (3) months current proof of receipt of the higher rental income. |
Please review the Arc Guideline Update Summary for a side-by-side comparison of the guideline revisions and modified policy effective dates for the topics above, which will be available on the website soon – visit the Wholesale page HERE and the Correspondent page HERE. As a reminder, this summary document is intended to highlight the guideline updates only; please refer to the Arc Underwriting Guide and product matrices for the complete Access, Edge, and Foreign National program guidelines.
This communication applies to Wholesale and Correspondent loan submissions. Please contact your Arc Home Account Executive with any questions.