Griffin Funding ranked Cotality’s published state equity-gain data for the period from Q1 2020 to Q2 2026. Cotality, a data and analytics company, reports gains exceeding $200,000 in average equity per mortgaged property in six of the 48 states included here. New Jersey, Connecticut and Rhode Island lead the comparison; seven of its top 10 states are in the Northeast. The ranking measures cumulative dollar gains since 2020, not current equity balances or the share of mortgaged properties considered equity-rich.

Yet large gains for owners can coexist with strained renter budgets. In California and Connecticut, two states above that $200,000 threshold, more than half of renters were cost-burdened in 2024, spending over 30 percent of income on housing and utilities. Those are the latest annual renter-burden figures used in Harvard’s 2026 housing report.

Together, the figures highlight two sides of household financial security: the assets a family already holds and the money it has left to save. They do not measure a state-by-state change in the homeowner–renter wealth gap.

Six states crossed the $200,000 mark

New Jersey led at $250,861, followed by Connecticut ($239,653), Rhode Island ($224,813), California ($214,632), Massachusetts ($213,288) and New Hampshire ($206,811). Vermont is not reported in this dataset; Delaware is excluded because its gain entry duplicates its current equity balance. Full coverage and definitions appear in the methodology.

The places gaining equity are not the only places under pressure

Connecticut’s reported equity increase was $239,653, while 52 percent of its renters were cost-burdened in 2024. California’s gain was $214,632, alongside a 54 percent renter-burden rate. The state cost-burden figures in Harvard’s report describe housing expenses relative to income, not renters’ assets.

The contrast also works in the other direction. Florida and Nevada had smaller equity gains, at $141,315 and $125,510, but higher renter-burden rates of 59 percent and 57 percent. These four examples show why an equity-gain ranking cannot stand in for a renter-hardship ranking.

Nationally, 22.7 million renter households were cost-burdened in 2024, including 12.1 million spending more than half their income on housing and utilities. A household putting that much toward shelter has less room to build emergency reserves, contribute to retirement accounts or save for a down payment.

Percentage gains can conceal a widening dollar gap

The Federal Reserve’s latest available Survey of Consumer Finances supplies a separate, inflation-adjusted measure of the national wealth divide. Median homeowner net worth rose from $295,500 in 2019 to $396,200 in 2022. For renters and other non-homeowners, it increased from $7,300 to $10,400. All four figures are expressed in 2022 dollars.

Source: Federal Reserve, Table 2. National family medians; total assets minus liabilities, not home equity alone.

The difference between those medians widened by $97,600, even though non-homeowners’ wealth grew faster in percentage terms. A large percentage increase from a small starting balance can still leave a household further behind in dollars. These group comparisons do not establish that ownership alone caused the gap.

A slower market does not erase the advantage of buying earlier

An owner can retain substantial gains even after home-price growth slows. That distinction matters for a renter waiting for affordability to improve: a market that stops booming has not necessarily returned to its earlier prices.

Cotality’s separate analysis of purchase timing reports that buyers who purchased in 2020 or 2021 accumulated about $86,000 more equity than those who purchased in 2022 or later. That comparison concerns purchase cohorts, not renters, but it illustrates how the timing of entry can shape a household’s accumulated cushion.

Washington, D.C., makes a related point about geography. Its $31,540 equity gain was below every state in this comparison, yet Cotality placed it ninth in current average equity among the jurisdictions reported. A place can hold substantial housing wealth without leading recent gains.

None of these figures makes a future gain certain. Falling values can erode equity, and additional borrowing can reduce an owner’s stake. The economic advantage is the cushion already accumulated, not a promise that it will keep growing.

The lasting divide is in the options available

Equity and cash flow solve different problems. Accumulated housing wealth may support a move, retirement or assistance to a family member. But paying an unexpected bill requires available cash or access to financing, and a valuable home does not guarantee either.

A second-lien HELOC or home equity loan can leave an existing first mortgage in place. A cash-out refinance replaces it with a larger loan. Both add debt secured by the home. Borrowing changes how a household accesses its wealth; it does not create new wealth by itself.

Renters can build assets through savings, retirement accounts, investments and businesses. Renting can also preserve flexibility and avoid ownership costs. The difficulty arises when housing expenses leave too little money to pursue those alternatives.

That is why the policy stakes extend beyond the next home-price reading. More attainable homes can widen access to ownership, while affordable rentals can make saving possible before a household buys, or for households that never do. A stronger balance sheet should not require having entered the housing market before a particular boom.

The test of the home equity boom is not simply how much wealth existing owners accumulated. It is whether the households still outside it can build financial security of their own.

Methodology

Griffin Funding sorted Cotality’s published gain chart; it did not produce the underlying equity estimates. The metric is the nominal change in average equity per mortgaged residential property from Q1 2020 to Q2 2026. Mortgage-free properties are excluded. Changing property and borrower composition can affect averages; this is not a fixed-cohort study.

The state gains are not inflation-adjusted. Calculating real gains would require expressing the starting and ending equity balances in the same period’s dollars before subtracting; simply discounting the nominal increase would not measure the change in purchasing power correctly. The Federal Reserve comparison above already uses constant 2022 dollars.

State comparison and source notes

The map and charts use the source chart’s values, rounded to the nearest thousand for display. Cotality’s release narrative rounds Texas to $58,000; the source chart reports $57,437, which appears as $57,000 on the map. The map covers the 48 included states.

Vermont’s absence reflects Cotality’s coverage, not a low ranking. Griffin Funding’s earlier equity-rich state comparison used ATTOM’s share of mortgaged properties with at least 50 percent equity, a different measure and dataset. Delaware is excluded because its gain entry duplicates its current equity balance. D.C. is shown on the map as unranked at $31,540.

Renter statistics describe 2024 and come from Harvard’s 2026 report, printed pages 32–33. The four state examples are illustrative, not a full pairing of renter burden across the ranking or a test of causation. The national wealth comparison uses the Fed’s 2019 and 2022 surveys. Equity data were retrieved for the original analysis on September 18, 2026.

The post Average home equity gains topped $200,000 in six states as renters faced heavy housing costs appeared first on Griffin Funding.

A Griffin Funding scenario analysis shows how small changes in mortgage pricing can outpace years of rent growth. On a $300,000 loan, increasing the mortgage rate from 6.75% to 7.75% raises the rent needed to maintain the same debt coverage by 8.3%. That is equivalent to about 4.5 years of growth at July’s 1.8% annual single-family rent pace, holding other assumptions constant.

The Fed’s outlook may matter more than the hike

The Fed’s policy committee voted 12 to 0 to lift the federal funds target range to 3.75% to 4%, citing elevated inflation. Nobody dissented.

For investors, the committee’s new projections matter more than the hike. The median official now sees the federal funds rate at 4.1% at the end of both 2026 and 2027, up from 3.8% and 3.6% in the June projections. The same projections don’t show inflation returning to the Fed’s 2% goal until 2029. Policymakers now expect higher rates for longer than they did three months ago. Investors hoping to wait out today’s borrowing costs may be waiting a while.

The Fed doesn’t set mortgage rates, but the bond market listens

A Fed hike doesn’t change anyone’s mortgage rate overnight. Mortgage rates track the bond market, and traders had priced in better than a 90% chance of this increase before it happened.

That anticipation has been lifting borrowing costs for weeks. The 10-year Treasury yield hit its highest level since 2007 the day before the decision. Mortgage News Daily’s 30-year fixed rate climbed to 7.19%, more than a percentage point above a year earlier. Freddie Mac’s weekly survey, which tracks owner-occupied buyers with 20% down and strong credit, reached 6.95% on Sept. 17, up from 6.76% a week earlier and 6.26% a year ago. Investment property loans generally price above that benchmark.

Rents are moving far more slowly

Single-family rents, the main income for small landlords, rose 1.8% over the year through July, below the 2.3% pace a year earlier, according to Cotality. Growth has now picked up for five straight months, though it remains below historical averages, and it is uneven: Chicago led major metros at 5%, while Houston managed 0.2%. Across all rental types, Apartment List found the national median rent was still 0.8% below its level a year before in August, although it has now risen seven months in a row.

A mortgage quote can change in a day. Rent growth takes time.

How DSCR math turns rates into rent

Residential DSCR financing evaluates qualifying rental income relative to principal, interest, property taxes, insurance and association dues, alongside other borrower and property requirements. A ratio of 1.0 means rent equals that payment. This analysis uses 1.25, meaning rent is 25% higher, as an illustrative target rather than a universal lending requirement. Because the ratio compares rent with the payment, keeping it steady means rent has to rise by the same percentage the payment does.

Griffin Funding modeled a $300,000, 30-year fixed loan, roughly a $400,000 purchase with 25% down, plus $500 a month for property taxes, insurance and association dues. 

Going from 6.75% to 7% raises the payment by about 2%. At 1.8% annual rent growth, rents need about 14 months to close that gap. Going from 6.75% to 7.75% raises the payment by about 8.3%. Closing that gap takes about 4.5 years.

The dollar amounts scale with loan size. A quarter point adds roughly $43 a month to principal and interest on a $250,000 loan and about $172 on a $1 million loan.

How it plays out on one purchase

Consider a hypothetical purchase. An investor is under contract on a $400,000 single-family rental expected to lease for $3,000 a month, with 25% down. At 6.75%, her coverage ratio is about 1.23. At 7%, it slips to 1.20. At 7.25%, it’s 1.18. At 7.75%, it falls to about 1.13. The house and the rent never change. At 7.25%, reaching the illustrative 1.25 target would require about $3,183 in qualifying monthly rent, $183 above her expected $3,000. Alternatively, keeping rent unchanged, she could reduce the loan to roughly $278,500 by adding about $21,500 to her down payment.

That additional cash becomes equity in the property, not a fee. But it is cash she can no longer keep on hand for repairs, vacancies or another purchase. Rent growth might narrow the gap over time. The additional down payment would have to be available at closing.

This is an illustrative example, not an actual borrower.

The same rent can support a smaller loan

The Fed’s projections are individual participants’ views, not a set policy path. The property-level math is more immediate. In this model, higher mortgage pricing reduces the loan amount that $3,000 in monthly rent can support at the selected coverage target. The buyer can contribute more equity or negotiate a lower purchase price, and different financing terms may also change the calculation.

That is the gap between rent growth and borrowing costs. Rent may rise over years, while the buyer has to meet the financing terms at closing. The house doesn’t have to get more expensive for the cash needed to buy it to go up.

Methodology

Payment figures are Griffin Funding calculations for a $300,000, 30-year, fully amortizing loan at each rate shown, plus a flat $500 per month for taxes, insurance and association dues. Rent needed equals the monthly payment multiplied by 1.25, an illustrative assumption rather than a lending standard. Because required rent rises in proportion to the payment, years of rent growth were calculated by comparing the percentage payment increase with Cotality’s 1.8% annual single-family rent growth (July 2026), compounded annually. The rent-growth comparison is not a forecast and does not measure the recovery of cumulative cash flow or investment returns. Loan-size figures compare principal and interest at 7.50% and 7.75% for each loan amount shown. All figures are illustrative and don’t represent any lender’s rates, pricing or qualification terms, which vary by credit, leverage, property type and loan structure. Changes in the federal funds rate don’t translate one-for-one into mortgage or DSCR loan rates.

The post A 1-percentage-point mortgage rate rise can outrun 4 years of rent growth appeared first on Griffin Funding.

Conforming mortgages fell below half of Optimal Blue rate-lock volume in April, the first time that had happened since at least January 2018. Conforming share was 47% in July and remained at 47% in August, while non-qualified mortgage (Non-QM) loans rose from more than 10% of locks in July to more than 11% in August.

Griffin Funding looked back at six years of Optimal Blue rate-lock data to see how much the market had changed. In July 2020, conforming loans accounted for 73.1% of product share. By July 2026, that figure had fallen 26.1 percentage points to 47%. Separately reported Non-QM snapshots moved in the other direction, rising from about 1.4% in August 2020 to 8.34% in August 2025 and more than 11% in August 2026.

The conforming figures are July prints; the Non-QM figures are separately reported August prints. Gap years are unsourced and left out. 

The missing conforming share did not simply move into FHA or VA

The most useful comparison is what happened to the rest of the mortgage mix. From July 2024 to July 2026, conforming share fell from 56.1% to 47%, a decline of 9.1 percentage points. Over the same period, the broader non-conforming bucket, which includes jumbo and Non-QM loans, rose from 12.4% to nearly 21%, an increase of roughly 8.6 points.

FHA stayed near 19% across the comparison. VA moved only modestly. That does not prove individual borrowers migrated directly from conforming loans into non-conforming products, but it does show where the market-share expansion occurred: overwhelmingly outside the GSE-eligible conforming channel.

Non-QM did not replace conforming one-for-one. Jumbo lending grew as well, and some high-balance Non-QM loans blur the line between the two. The market is simply less concentrated in one channel than it used to be.

Non-QM is taking a larger share of that expansion

Optimal Blue’s year-over-year data show how quickly Non-QM gained ground. From August 2024 to August 2025, its share of mortgage activity rose from 5.6% to 8.34%, an increase of nearly 49%. By August 2026, Non-QM had risen above 11% of rate-lock volume.

A Bank of America Securities analysis reported by HousingWire estimates Non-QM originations reached $108 billion in 2025 and projects that volume will rise to $175 billion in 2026, an increase of roughly 62% and a new post-crisis high.

The growth is concentrated in investors and borrowers with nontraditional income

A closer look at the Non-QM market shows where much of that growth is coming from. Optimal Blue’s August 2026 data show that investor and debt-service-coverage-ratio loans represented more than 35% of Non-QM production, while bank-statement loans accounted for nearly 30%. Other expanded-guideline products made up the remainder.

This analysis is based on the August 2026 composition. The third share is the balance after the two published by Optimal Blue, not a figure Optimal Blue reported.

Together, those products serve two groups that often fall outside traditional agency underwriting: real estate investors qualifying through property cash flow and borrowers documenting income through bank statements.

The mix inside Non-QM is changing, too. Investor and debt-service-coverage-ratio (DSCR) loans represented 29% of Non-QM production in July 2025. Their share rose above one-third by July 2026 and exceeded 35% in August 2026, even as the broader Non-QM market continued to grow.

For real estate investors, DSCR loans are underwritten primarily using the rental property’s cash flow rather than the borrower’s personal employment income. For self-employed borrowers, bank-statement loans can use deposits to document qualifying income when tax-return income does not fully reflect business cash flow.

Higher home prices are part of the story, but not the whole story

Rising home prices are an obvious part of the explanation. As more borrowers move above agency loan limits, non-conforming lending naturally grows. The changing borrower and product mix suggests other factors are contributing too.

FHFA raised the baseline conforming loan limit to $832,750 for 2026, up $26,250 from 2025, with a high-cost ceiling of $1,249,125. Raising the limit allows more large mortgages to remain eligible for purchase by Fannie Mae and Freddie Mac. Non-conforming share nevertheless continued to climb.

At the same time, large loans are increasingly showing up inside Non-QM itself. Bank of America Securities estimates loans above $1 million account for about 28% of new 2026 Non-QM production, up from 20% in 2018. That suggests the non-agency market is expanding on multiple fronts: traditional jumbo borrowers, investors using DSCR, self-employed borrowers using alternative documentation, and high-balance loans moving through Non-QM channels.

This is not the same market as pre-2008 subprime

The label “Non-QM” can make the current expansion sound like a return to the loose-credit mortgage market that preceded the financial crisis. The label alone does not establish whether a loan has weak credit.

Today’s non-agency market includes investor loans underwritten using property cash flow, bank-statement programs that offer another way to document income, and high-balance loans that do not fit traditional agency channels. Some business-purpose investor loans may be exempt from federal Qualified Mortgage rules, even though the industry commonly groups them with Non-QM lending. These products carry different risks and pricing than conforming mortgages, but they do not automatically indicate weak credit.

Bank of America Securities also found that delinquencies have climbed among Non-QM loans originated between 2022 and 2024, especially cash-out refinances, bank-statement loans and loans to borrowers with multiple mortgages. But losses remain low: 3.6 basis points across roughly $281 billion in Non-QM loans originated and securitized since 2018. Loans originated in 2025 have performed better after lenders tightened standards.

The more important shift is structural: A larger share of mortgage demand now comes from borrowers and properties that need a different underwriting calculation than the conforming market was designed to provide.

The conforming mortgage is no longer the only center of the market

Conforming lending remains the single largest mortgage category. It held 47% of Optimal Blue rate-lock volume in August 2026, making it the largest category, but it is no longer a majority.

What replaced that majority is not one product. It is a more fragmented market: government lending, jumbo mortgages, DSCR loans, bank-statement loans and other expanded-guideline programs serving different borrower and property profiles.

That growth is one sign of a broader shift. The mortgage market is adapting to how Americans earn income, invest in property and finance increasingly expensive homes. Conforming loans now occupy a smaller part of that landscape.

Methodology and how to read this analysis

Griffin Funding analyzed publicly reported mortgage rate-lock shares from Optimal Blue’s Mortgage Pricing Insights and Market Advantage reports. Optimal Blue reports that its platform is used to price and lock more than one-third of mortgages nationwide. The figures represent activity on that platform, not a census of every U.S. mortgage lock or the stock of outstanding mortgages.

Historical comparisons use the exact months stated because not every product-share figure is publicly available for every month. Optimal Blue groups jumbo and Non-QM loans within its broader non-conforming category, so those figures should not be interpreted as a pure measure of either segment on its own.

The analysis is descriptive. Changes in category share do not establish that individual borrowers moved directly from one loan type to another. Bank of America Securities forecasts and market estimates are cited as projections, not realized 2026 full-year totals.

Estimates of total Non-QM volume vary by source and methodology. Griffin Funding’s earlier analysis of HMDA loan-level data found that Non-QM accounted for roughly 10% of 2025 originations by dollar volume, while Bank of America Securities estimated $108 billion for the same year. The figures are not directly comparable because the sources use different definitions and methodologies, and neither should be compared directly with totals produced from broader loan-level datasets.

This story was produced by Griffin Funding and reviewed and distributed by Stacker.

The post Conforming mortgages just lost their majority. Non-QM is helping drive the shift appeared first on Griffin Funding.

Self-employed buyers shopped for mortgages at almost exactly the same rate as wage-employed buyers. The surprise is why some of them were shopping. About 31.1% of respondents reporting self-employment applied to more than one lender, compared with 31.5% of wage-employed respondents. After adjustment, there was still no meaningful difference between the groups.

Among the buyers who did apply to multiple lenders, the experience looked different. A Griffin Funding analysis of the FHFA/CFPB National Survey of Mortgage Originations public-use file found that 21.4% of respondents reporting self-employment said an earlier mortgage application had been turned down, compared with 14.5% of wage-employed respondents. After adjustment, the self-employed group was 51% more likely to report an earlier turn-down.

Every buyer in that headline group eventually got a mortgage. So this is not saying one in five self-employed homebuyers were denied and never got a loan. It says that among buyers who had to apply to more than one lender before reaching the closing table, an earlier “no” showed up more often in the self-employed group.

Non-QM was growing fast on a separate track

That finding lands in a mortgage market that has been changing quickly. A separate Griffin Funding analysis highlighted Polygon Research’s HMDA-based estimate that non-QM origination volume grew from $181.8 billion in 2024 to $239.3 billion in 2025, a 31.6% jump. Loan count rose 24.7%, to 697,605 originations, and non-QM reached about 10% of the U.S. mortgage market by dollar volume and 10.2% by loan count. Because HMDA does not contain an official non-QM flag, Polygon uses a rules-based classification methodology tied to the ATR/QM framework.

Non-QM is a broad category, not a synonym for self-employed lending. It includes DSCR loans, alternative-documentation mortgages, interest-only structures and other loans that fall outside the Qualified Mortgage framework. But bank statement loans are one important part of that market because they can document qualifying income through bank deposits rather than relying only on tax returns.

The federal survey cannot tell us whether the borrowers who reported an earlier turn-down later used non-QM financing. The datasets are separate. What they show, side by side, is a mortgage market where self-employed buyers report more qualification friction while a much larger share of lending is being built around borrowers and loan structures that do not fit neatly inside the traditional box.

For one Hawaii couple, the problem was not earning income. It was proving it.

One recent Griffin Funding purchase shows what that mismatch can look like in real life. A self-employed couple had been running their business since 2023 and were buying a primary residence in Hawaii. By early 2026, however, the 2025 business tax return had not yet been filed. For the conventional path they were considering, that left them without two full filed years of business tax returns. Their business had not suddenly stopped producing income. The problem was the documentation window.

Griffin moved the file to a bank statement loan and reviewed 12 months of business deposits. The higher-credit spouse became the qualifying borrower, and underwriting then had to document how long she had been self-employed and how much of the business income belonged to her. A CPA attestation supported at least two years of self-employment, while an operating agreement documented each spouse’s ownership share.

Even then, the file was not simple. In underwriting, deposits from a newer business account could not be counted because the account did not have 12 months of history. Qualifying income dropped, the debt-to-income ratio moved higher, and the loan had to be recalculated. The couple still closed in March 2026.

That loan was not part of the federal survey, and the record does not document an earlier lender turn-down. It belongs in this story for a narrower reason: it shows why alternative income documentation exists in the first place. For some self-employed borrowers, the question is not simply, “Do you earn enough?” It is, “Which income can this mortgage program actually document and count?”

The shopping rate was almost identical. The pressure to qualify was not.

Self-employed buyers were not applying to more lenders overall. But among those who did, qualification was more likely to be part of the reason.

Looking for better terms was common in both groups: 81.7% of self-employed multi-lender applicants and 83.6% of wage-employed applicants cited that reason. The adjusted difference was not statistically significant. Concern about qualifying told a different story. It was cited by 42.5% of self-employed multi-lender applicants, compared with 29.6% of wage-employed applicants. After adjustment, the self-employed group was 48% more likely to cite that concern.

Borrowers could choose more than one reason, so someone could be comparing rates and worrying about approval at the same time. The important point is simpler: the two groups shopped around at nearly the same rate, but self-employed borrowers were more likely to have a qualification problem in the background when they did.

The paperwork tells the same story

The earlier turn-down was only one sign of extra friction. Across the full 23,299-borrower analytical population, 73.2% of self-employed respondents had a follow-up request for more information about income or assets, compared with 67.7% of wage-employed respondents. After adjustment, the self-employed group was 9% more likely to have that follow-up request.

A five-and-a-half-point gap may not sound dramatic on paper. In a mortgage file, it can mean another statement, another explanation, another ownership document or another round of underwriting questions. The Hawaii couple ran into several of those steps in one purchase: bank statements, ownership documentation, a CPA attestation and then a last-minute question about which account history could actually be used.

Other survey questions point in the same direction. Among respondents with a valid answer to the co-signer question, 13.5% of the self-employed group said they had to add another co-signer to qualify, compared with 9.7% of the wage-employed group. After adjustment, self-employed respondents were 38% more likely to report that step.

Documentation satisfaction also differed. Among respondents with a valid answer to that question, 11.9% of the self-employed group were coded as “not at all satisfied,” compared with 7.6% of wage-employed respondents. After adjustment, that response was 56% more likely in the self-employed group.

These are not failure rates, and most self-employed borrowers did not report those outcomes. They are smaller pieces of the same picture: getting to closing sometimes required more explaining, more documentation and more back-and-forth.

Why self-employed income can take more explaining

Fannie Mae’s current Selling Guide for self-employed borrowers requires lenders to evaluate the stability of the income, analyze personal and, when applicable, business income or loss, and determine how much income can reasonably be relied on for the mortgage. The process includes a written cash-flow analysis or an approved equivalent method.

That is not a flaw in the underwriting process. A lender still has to determine whether the income is stable and whether the borrower can repay the loan. But a business owner can have far more moving pieces than a salaried employee: multiple accounts, ownership percentages, expenses, K-1 income, changing business structures and deposits that do not line up neatly with a pay stub.

Bank statement programs use a different documentation path. They review eligible deposits over a defined period and apply program-specific expense assumptions to determine qualifying income. They still involve credit standards, reserves, property requirements, debt-to-income limits and ability-to-repay analysis. The difference is the evidence used to establish income.

A bigger non-QM market does not erase the problem. It gives borrowers more paths through it.

The federal survey shows that among buyers who shopped multiple lenders and eventually closed, respondents reporting self-employment were more likely to report an earlier turn-down and more likely to say they were worried about qualifying. Separately, Polygon Research estimates non-QM originations grew 31.6% in 2025. The Hawaii purchase shows what one alternative-documentation path can look like when the issue is not a lack of business activity, but how much of that activity can be turned into qualifying mortgage income.

The data do not show that one caused the other. They show two sides of the same market: more qualification friction among self-employed buyers and a growing non-QM market built partly for borrowers whose finances do not fit traditional income documentation.

Methodology

Griffin Funding analyzed the May 27, 2026 public-use release of the National Survey of Mortgage Originations, jointly managed by the Federal Housing Finance Agency and Consumer Financial Protection Bureau. The release contains 62,359 sample mortgages originated from 2013 through 2024 across the first 46 processed survey waves.

The main analytical population contains 23,299 respondent-borrowers associated with purchase mortgages on current primary residences: 2,872 respondents reporting self-employment and 20,427 reporting wage employment without self-employment. The headline analysis is limited to 7,045 respondents who applied to more than one lender and had a coded earlier-turn-down response: 863 respondents reporting self-employment and 6,182 reporting wage employment.

Employment status was measured when respondents completed the survey after origination, not necessarily when they applied for the mortgage. The self-employed group includes full- and part-time self-employment, including some respondents who reported self-employment as a secondary work status. Results should therefore be read as associations among respondents reporting those work statuses, not proof that self-employment itself caused a lender decision.

Percentages were calculated using the official NSMO analysis weight. Adjusted risk ratios were estimated with weighted modified-Poisson models controlling for survey-time household-income category, age and age squared, education, sex, Hispanic status, race, marital status, origination credit score and origination year. The models do not control for every underwriting factor that could differ between the groups, including debt-to-income ratio, loan-to-value ratio, loan amount and property type.

For reference, the adjusted estimates were: applying to more than one lender, risk ratio 1.01 (approximate 95% CI 0.95 to 1.07); earlier turn-down, 1.51 (1.31 to 1.73); looking for better terms, 0.98 (0.95 to 1.02); concern about qualifying, 1.48 (1.36 to 1.61); follow-up request for income or asset information, 1.09 (1.06 to 1.12); adding another co-signer, 1.38 (1.24 to 1.54); and being “not at all satisfied” with documentation, 1.56 (1.38 to 1.75).

Survey routing, weighting and variable definitions were checked against FHFA’s Technical Documentation, Codebook and Unweighted Tabulations and Waves 45 and 46 questionnaire. The co-signer analysis included 19,055 valid responses: 2,484 from respondents reporting self-employment and 16,571 from the wage-employed comparison group. The documentation-satisfaction analysis included 19,119 valid responses: 2,488 and 16,631, respectively.

FHFA’s separate Select Weighted Tabulations, 2014-2024 provide official weighted tables for many NSMO questions but do not publish the self-employment cross-tabulations used here. The 21.4% and 14.5% turn-down rates, the other employment-group comparisons and the adjusted risk ratios are Griffin Funding calculations from the public-use file, not published FHFA statistics.

The public-use response variables can combine direct, edited and imputed answers. The file also does not provide the replicate weights and complete sample-design variables required for official FHFA variance estimates, so the confidence intervals reported here are model-based approximations rather than official FHFA confidence intervals.

The post More than 1 in 5 self-employed buyers who applied to multiple lenders reported an earlier turn-down appeared first on Griffin Funding.

To see where that cushion is deepest, Griffin Funding reviewed ATTOM’s Q2 2026 U.S. Home Equity & Underwater Report and its state-by-state equity ranking. The result is a striking divide: In Vermont, nearly four out of five mortgaged properties are equity-rich. In Louisiana, fewer than one in five meet the same standard.

ATTOM defines a mortgaged property as equity-rich when the combined estimated balance of loans secured by the home is no more than half of its estimated market value. Nationally, 41.1% of mortgaged residential properties met that definition in Q2 2026.

Where home equity runs deepest

Vermont led the country by a wide margin, with 78.9% of mortgaged properties classified as equity-rich. Montana ranked second at 59.0%, followed by Rhode Island at 54.9%, South Dakota at 53.6% and New Hampshire at 53.1%.

The Northeast is especially well represented. Seven of the 10 highest-ranking states are in the region, and Vermont sits nearly 38 percentage points above the national rate.

At the other end of the ranking, Louisiana had the smallest equity-rich share at 17.5%. Minnesota followed at 20.1%, then Maryland at 28.0%, Alaska at 30.4% and Iowa at 32.2%.

The distance between those markets is a reminder that a record national total does not describe every mortgage holder’s experience.

The national cushion is strong, but not evenly distributed

The record $18 trillion total is a strong national backdrop. But ATTOM’s Q2 report contains an important countertrend: The share of mortgaged properties considered equity-rich fell from 47.4% in Q2 2025 to 41.1% one year later.

After four consecutive quarterly declines, the rate is near a five-year low. ATTOM also updated the report to exclude transactions in which a single jumbo loan is secured by multiple properties. The company did not quantify the effect of that change, so year-over-year comparisons should be interpreted cautiously.

Only four states posted year-over-year increases: North Dakota, South Dakota, Kentucky and Wyoming. Every other state in ATTOM’s state-level ranking had a smaller equity-rich share than a year earlier.

Minnesota experienced the sharpest decline, falling from 37.6% to 20.1%. It also had the highest seriously underwater rate in the country at 12.1%, up from 2.6% a year earlier, per ATTOM’s Q2 report. and Minneapolis had the highest seriously underwater rate among large metros ATTOM analyzed, with the second-lowest equity-rich share behind Baton Rouge. Michigan dropped from 50.8% to 39.3%, while California declined from 56.9% to 45.6%.

The pattern also appeared across large metros: 104 of the 108 areas ATTOM analyzed had lower equity-rich shares than a year earlier. The bottom of the distribution moved as well. ATTOM counted 3.2% of mortgaged properties as seriously underwater, meaning loan balances at least 25% above estimated market value, up from 2.7% a year earlier.

At first, that may seem to conflict with ICE’s record equity figure. It does not. ICE estimates the total dollar value of equity held by mortgage borrowers. ATTOM measures the percentage of mortgaged properties that clear a much higher bar: having at least 50% equity.

The country can therefore hold more equity in total, while a smaller share of properties meets ATTOM’s equity-rich threshold. A homeowner can also have meaningful equity without owning half of the property outright.

Low-rate mortgages are changing how owners access equity

Home equity is not cash sitting in an account. To use it, a homeowner generally has to sell the property or borrow against it.

For many owners, the second option now comes with a difficult calculation. They may have substantial equity, but they may also have a first mortgage secured when rates were considerably lower.

A cash-out refinance replaces that existing mortgage with a new, larger first mortgage. For someone who already has a favorable rate, refinancing the full balance may be an expensive way to access only part of the home’s equity.

That helps explain renewed interest in HELOCs and other home equity financing options. A HELOC, home equity loan or other second lien may allow a qualified homeowner to borrow against the property while leaving the original first mortgage in place.

In the first quarter of 2026, 54% of all home-equity extraction came through second liens, according to ICE’s June Mortgage Monitor. Second-lien withdrawals reached their strongest first-quarter volume in 18 years as more borrowers sought to preserve existing low-rate mortgages.

TransUnion’s Q2 2026 Credit Industry Insights Report showed a similar shift. Home-equity originations rose 5.8% year over year to 560,000 in the first quarter of 2026, driven by a 16.8% increase in HELOC originations. TransUnion reports origination data one quarter in arrears.

Borrowing against a home is not free money. It adds debt, creates another payment and uses the property as collateral. But for qualified homeowners who understand those tradeoffs, accumulated equity can create choices that would not otherwise exist.

The same equity can serve very different homeowners

A longtime homeowner may view equity as a safety net that can remain untouched for years. Another might use part of it for renovations, debt consolidation or a large, planned expense.

For a self-employed homeowner, the challenge may be less about whether wealth exists and more about how income is documented. Business owners, freelancers and entrepreneurs often have earnings that do not arrive as a steady paycheck. In those cases, bank statement loans may evaluate qualifying income using deposits rather than relying solely on W-2s, pay stubs or traditional tax-return calculations.

Real estate investors may look at equity differently. Equity built in an existing rental property can become part of a decision to renovate, refinance or pursue another acquisition. When financing rental properties, debt service coverage ratio (DSCR) loans primarily evaluate the property’s rental income rather than the investor’s traditional employment income.

These borrowers may have different goals, but the underlying benefit is the same: financial flexibility.

For many mortgage holders, the real value is having options

The record $18 trillion figure is a sign of strength, but it should not be read as an invitation for every homeowner to take on more debt.

Some owners may choose to borrow against their equity. Others may leave it untouched, allowing it to remain part of their long-term household wealth.

What matters is that millions of mortgage holders now have a meaningful cushion inside the homes they already own.

That cushion is deeper in Vermont than in Louisiana, while many recent buyers have far less equity to draw on. But across the country, home equity remains one of the most important sources of household financial resilience.

For many mortgage holders, its greatest value may be simple: It gives them options.

Methodology

Griffin Funding reviewed ATTOM’s Q2 2026 state-level home equity data to identify where mortgaged properties had the highest and lowest equity-rich shares. The review also compared Q2 2026 figures with Q2 2025 percentages for each state in ATTOM’s published ranking.

ATTOM classifies a mortgaged residential property as equity-rich when the estimated combined balance of loans secured by the property is no more than 50% of its estimated market value. State percentages describe mortgaged properties, not individual people or homes owned free and clear.

ATTOM notes in its Q2 2026 report that it updated the analysis to exclude activity in which a single jumbo loan is secured by multiple properties, which previously offset loan-to-value ratios in markets with heavier investor participation. Year-over-year comparisons in this analysis should be read with that revision in mind. Negative equity figures come from ICE’s August 2026 Mortgage Monitor. TransUnion reports origination volumes one quarter in arrears, so figures cited from its Q2 2026 report describe first-quarter originations.

National total and tappable-equity estimates come from ICE Mortgage Technology. Home-equity origination and second-lien trends are based on data from ICE’s June Mortgage Monitor and TransUnion’s Q2 2026 Credit Industry Insights Report.

The post Home equity reaches a record $18 trillion among US mortgage holders. Here is where it runs deepest appeared first on Griffin Funding.

Real estate investors are doing something different. When they open a line against a property they own but do not live in, the average reported credit line is roughly two and a half times the size of an owner-occupied HELOC. That gap appears in every year of the Home Mortgage Disclosure Act (HMDA) data analyzed, and in 2025 both the reported number of those loans and their average line size reached four-year highs.

The figures come from a Griffin Funding analysis of Home Mortgage Disclosure Act loan-level data, published by the Federal Financial Institutions Examination Council (FFIEC) and the Consumer Financial Protection Bureau (CFPB), covering every reported HELOC origination from 2022 through 2025. That data records whether a property is a principal residence, a second home, or an investment property, but no published report breaks HELOC originations out that way, so the numbers below have not appeared anywhere before.

What the data shows

In 2025, lenders originated 27,183 HELOCs on investment properties, worth $10.4 billion. The average line was $384,000. Over the same year, owner-occupied HELOCs averaged $146,000. All figures in this section come from the HMDA loan-level datasets linked above.

The consistency matters more than any single year. Owner-occupied HELOC line sizes moved 15% between their low and high from 2022 through 2025. Investment-property line sizes swung 59% over the same stretch and never fell below 1.8 times the owner-occupied average.

The gap isn’t a fluke of one hot year, either. Even as the market cooled off after 2022, investors kept borrowing bigger.

These loans remain a small slice of the overall market, 2.27% of HELOC originations in 2025. But that share is the highest since 2022, and the origination count is up 47% from its 2023 trough.

Why the money is moving this way

The reason is a mortgage nobody wants to give up. Millions of homeowners hold first mortgages near 3%. Refinancing to pull cash out means surrendering that rate for something more than twice as high, so fewer people are doing it. They are borrowing against equity instead and leaving the original loan untouched.

The Federal Reserve Bank of New York’s Household Debt and Credit Report put HELOC balances at $459 billion in the second quarter of 2026, a 17th consecutive quarterly increase and $142 billion above the low reached in early 2022. Intercontinental Exchange’s Mortgage Monitor reported that mortgage-holder equity reached a record $18 trillion over the same period, with $11.7 trillion of it tappable across 47.5 million borrowers while keeping a standard equity cushion.

An analyst at S&P Global Ratings told National Mortgage News that second liens and HELOCs should keep growing precisely because so many borrowers are sitting on cheap first mortgages and expensive equity at the same time. Researchers at Bank of America, quoted in the same publication, expect $41 billion in second-lien and HELOC bond issuance this year, against $30 billion last year.

For an investor, that math is not a compromise, but is the whole point. Consider someone who bought a $320,000 rental in 2021 at a 6% rate. By 2026 the property has enough equity to fund a down payment on the next one, and refinancing would mean giving up the 6% loan. Opening a line against the property instead, at somewhere around 8% to 9%, lets them draw $65,000 while the original mortgage stays exactly where it is. Only the drawn balance carries the higher rate, and only until the next property starts covering it. 

One explanation for the larger lines is how investors can use their equity. A homeowner might tap equity for a renovation or another household expense, while an investor may use it to help fund another acquisition. In that case, the amount of credit sought can be tied to the capital required for the next property rather than the cost of a home-improvement project.

Where it concentrates

Hawaii leads the country by a wide margin, with 11.5% of its 2025 HELOC originations going to investment properties, roughly five times the national rate. Oklahoma follows at 5.8%, then Mississippi at 5.5%, Louisiana at 5.2%, and Nevada at 4.7%. Colorado and California both sit above 4% on much larger origination bases.

At the other end, Ohio came in at 0.8%, with Wisconsin, Michigan, New Hampshire, and Indiana all near or below 1.1%. These state figures are drawn from the same HMDA 2025 dataset.

The financing behind it

Investment-property borrowers frequently cannot document income the way agency underwriting requires, which is why much of this lending happens outside conventional channels. Loans underwritten on a property’s rental income, known as debt service coverage ratio (DSCR) loans, and loans underwritten on deposit history rather than tax returns have become the dominant alternative-documentation categories in the non-qualified mortgage (non-QM) market. EFMT 2026-NQM1, a $566.7 million transaction rated by Kroll Bond Rating Agency in February 2026, drew 87.4% of its 1,275-loan pool from those two categories plus asset-based documentation.

That market has scaled quickly. KBRA put non-QM issuance at $33 billion through August of 2025 in its Non-QM (residential mortgage-backed securities) Default Study, tracking to match or beat the prior year’s record. Its 2026 presale reports also cover two Goldman Sachs securitizations backed entirely by DSCR collateral, GSMBS 2026-DSC1 at $301.8 million across 1,331 rental-property mortgages and GSMBS 2026-DSC2 at $304.1 million across 1,373.

Growth of that speed invites scrutiny. Moody’s Ratings noted in its 2026 RMBS outlook that some lenders have loosened DSCR underwriting, including accepting full lease amounts without capping them against market rents. Standards that slip during an expansion tend to surface in performance data a few years later.

Methodology

Figures are drawn from the FFIEC and CFPB HMDA loan-level datasets for 2022 through 2025, filtered to originated, non-reverse open-end lines of credit and grouped by occupancy type. Totals were validated against the CFPB’s published annual HELOC origination counts in its Data Point: Mortgage Market Activity and Trends reports and matched within 0.05% for every benchmarked year. Puerto Rico was excluded from state rankings for insufficient sample size.

HMDA records occupancy but not underwriting method, so this analysis covers investment-property HELOCs of all types and cannot isolate any single loan product. Because the HMDA open-end reporting threshold changed after 2021, multi-year volume growth is calculated from 2022 onward. 

The post When investors borrow against a rental, they tend to borrow big appeared first on Griffin Funding.

Three things are checkable right now.

Figure closed the Kiavi acquisition. In a newsroom post dated September 1, 2026, Figure CEO Michael Tannenbaum announced the deal had closed. Figure purchased Kiavi’s technology platform, and a new joint venture between Figure and Sixth Street will originate residential transition loans (fix-and-flip) and sell them through Figure Connect, Figure’s capital markets marketplace. Figure says Kiavi adds more than $7 billion in volume across RTL and DSCR loans. National Mortgage Professional reported the price at $717 million.

Figure’s DSCR page now routes to Kiavi. The page at figure.com/dscr-loan/ carries a banner reading “We’ve acquired Kiavi, the #1 Residential Transition Loan lender and AI-powered platform for residential real estate investors.” The page content is unchanged, but the calls to action are not. “Check your DSCR rate,” “Get a free DSCR quote,” and “Get started” all open a Kiavi rate form tagged as a Figure partnership redirect.

Figure updated its disclosures. The footer of Figure’s DSCR page now reads: “Kiavi Funding LLC NMLS #1125207 is a subsidiary of Figure Technology Solutions, Inc.” and “All DSCR and Residential Loans are originated and funded by Figure Lending LLC dba Figure effective 9/1/2026.”

That’s the public record. Figure has not published a date for when combined underwriting guidelines, pricing, or a single application flow will be final, and it hasn’t said whether the Figure-branded DSCR loan will keep its current terms once Kiavi’s platform is fully integrated.

What Figure’s DSCR page says today

For anyone comparing, here are the terms Figure publishes on its DSCR page as of September 1, 2026:

• Loan amounts: $100,000 to $2,000,000
• Minimum FICO: 660
• DSCR: as low as 0.8x
• Maximum LTV: 80% for rate-and-term refinances, 75% for cash-out
• Lien position: first lien only
• Property types: single-family, condos, PUDs, townhomes, 2 to 4 units
• Availability: 49 states plus D.C. listed, with a notice that no New York applications can be taken through the site
• Down payment: “typically 20%, though it depends on your DSCR”

Kiavi publishes its own DSCR terms on kiavi.com. We’re not restating them here because they may move during the integration, and we’d rather you check the source than rely on a number that goes stale.

What this means if you were about to apply with Figure

Nothing about the acquisition makes a DSCR loan harder to get. It does add a variable.

If you already have a Figure or Kiavi quote, get it confirmed in writing before you go under contract. Companies mid-integration change rate sheets, guidelines, and points of contact, and a quote from August may not survive September. Ask who your lender of record is, which entity will service the loan, and whether the terms you were quoted are locked.

If you were about to start an application, you’ll be filling out Kiavi’s form, not Figure’s. That’s fine if Kiavi’s program fits your deal. The four things to check against your property: the $2 million ceiling, the 660 FICO floor, the 0.8x DSCR floor, and the first-lien-only requirement. If any of those is a problem, you need a different lender, and the acquisition doesn’t change that.

Automated underwriting also tends to do best on standard single-family rentals. If your property is a condo with a warrantability question, a 2 to 4 unit building, or a short-term rental qualified on projected income, ask up front how the file will be reviewed and by whom, because those are the deals where a human underwriter changes the outcome.

If your deal is above $2 million, your credit is between 620 and 659, your property’s DSCR is under 0.8, or you need a second-lien DSCR product, keep reading.

How the published terms compare

The table below puts Figure’s published DSCR terms next to Griffin Funding’s. Figure’s column is drawn from figure.com/dscr-loan/ as of September 1, 2026. Griffin’s column is drawn from our current guidelines.

Figure column: figure.com/dscr-loan/ as of September 1, 2026. Griffin column: current Griffin Funding guidelines, subject to underwriting approval. Not a rate quote or commitment to lend.

Two notes on that table. Figure’s published floors (660 FICO, 0.8x DSCR) are reasonable for a lender running automated underwriting on standard single-family rentals, and plenty of deals clear them. The gap shows up on everything else: jumbo balances, thin cash flow, borrowers with a 620 to 659 score, second liens, and anyone who wants a state-licensed, federally supervised lender behind a business-purpose loan.

Where Griffin stands

Griffin Funding is funding DSCR loans today in 47 states plus D.C. Nothing about our program changed this month. In August 2026, Griffin funded 85 DSCR loans totaling $28,044,033 across 31 states.

We don’t have Figure’s blockchain marketplace, and we’re not building one. What we have is a direct lender that underwrites the whole file, with multiple capital sources behind it, so a deal that falls outside one box has somewhere else to go. That’s why we can offer no-minimum DSCR and a no-ratio program, while most of the market draws a line at 1.0 or 1.25.

If you’re comparing lenders, start with the eight criteria in our best DSCR lenders comparison, which now includes the Kiavi ownership change. To see how a specific property pencils, run it through the DSCR loan calculator. For metro-level rent, value, and DSCR data in your state, use the DSCR loans by state hub.

Current program details are on the Griffin Funding DSCR loan page.

What to watch next

Figure’s stated plan is to tokenize DSCR and RTL loans as core products on Figure Connect and to offer Kiavi’s underwriting technology to its partner network of more than 480 lenders and brokers. If that happens, expect Figure-branded and Kiavi-branded DSCR loans to converge on one set of guidelines. Watch for three signals: a change to the CTA destination on figure.com/dscr-loan/, updated terms in the page’s FAQ block, and a change to the originating-entity disclosure in the footer. We check that page on the first of each month and will update this post when any of the three moves.

The post Is Figure Still Offering DSCR Loans? What the Kiavi Acquisition Means for Rental Investors appeared first on Griffin Funding.

One of the barriers to entry that new property investors have, as well as an obstacle that prevents existing investors from expanding their rental property portfolio, is access to capital. An individual might know that there’s an opportunity to buy a home and generate decent returns via rent, covering financing costs and turning a profit in the process, but getting approved for a traditional mortgage in this scenario comes with a whole host of eligibility implications, not to mention tax obligations.

Debt service coverage ratio (DSCR) loans are an alternative to standard institutional mortgages and can be a good fit for investors looking to buy into rental properties. With the market slowing, now may be the time for keen investors to act. Griffin Funding, a mortgage and home loan lender, broke down exactly what DSCR loans are and how they function in a rental property investment context.

The Basics of Cash-Flow Underwriting

Cash-flow underwriting evaluates a rental property based on its ability to generate income rather than the personal income of the borrower. Instead of calculating debt-to-income ratios using W-2s and tax returns, lenders analyze the DSCR to determine if the asset pays for itself.

DSCR is calculated by dividing gross monthly rent by monthly PITIA (principal, interest, taxes, insurance, and association dues). When a property’s gross rent matches its total housing obligation, the ratio sits at 1.0. A ratio above 1.25 indicates strong monthly cash flow, earning borrowers lower interest rates and lower equity requirements.

A Closer Look at DSCR Calculations

To qualify for an investor mortgage, the property must undergo a physical appraisal alongside a market rent analysis via Fannie Mae Form 1007. The appraiser reviews local comparable leases to establish the fair market rent, which forms the gross monthly income baseline for underwriting.

For a three-bedroom single-family rental grossing $3,000 in monthly rent with a calculated $2,400 total PITIA, the math breaks down as the $3,000 rent divided by the $2,400 PITIA, providing a DSCR ratio of 1.25. Lenders set their own program parameters around this coverage metric. Ratios at 1.25 or higher generally unlock a lender’s best pricing and its lowest down payment. Ratios between 1.00 and 1.24 still cover the monthly obligation, though lenders tend to respond with a higher credit requirement or a lower loan-to-value limit. Below 1.00 the property runs a monthly deficit, and lenders willing to write the loan ask for a larger down payment and deeper reserves to offset it.

Even when rental figures fall below break-even thresholds, specialized debt-coverage options allow capital deployment into value-added acquisitions. Such flexibility is key to enabling investors to capitalize on opportunities that present themselves, especially if they can determine that the long-term prospects of a rental property promise significant returns that aren’t reflected in its current valuation.

Appreciating the Qualification Criteria

While cash-flow underwriting waives traditional employment verification, lenders offset that by tightening asset and credit requirements. DSCR loans sit outside agency guidelines, so there is no single national standard and the baselines vary by lender. Most programs start around a 640 credit floor, though some lenders go lower. Down payment requirements typically range from 20% to 25%, but they sit at each lender’s discretion and move with credit tier. A stronger score buys a smaller down payment, while borrowers near the bottom of a lender’s range should expect to put more in. Griffin Funding, for example, sets its own floor at 620 and allows borrowers with optimal credit to go as low as 15% down. Reserves are the most consistent requirement, typically three to six months of PITIA held after closing.

Those requirements apply to a fast-growing slice of the market. Investor and DSCR loans made up 33.5% of non-QM loan volume in recent lock data.

The Tax Angle

Conventional mortgages cap investors at 10 financed properties while penalizing tax write-offs that lower net reported income. Cash-flow underwriting removes these barriers, allowing self-employed borrowers and entity-based investors to scale without tax return scrutiny.

Self-employed buyers frequently leverage nonconforming cash-flow loans to qualify without personal income documentation. Because qualification ties to the property rather than the borrower, investors can close through an LLC or another entity, which with most lenders keeps the mortgage off their personal credit report. Most DSCR lenders still require a personal guarantee on entity-vested loans, so the separation is about how the debt is reported rather than who is ultimately liable.

An Ongoing Market Opportunity

In short, cash-flow underwriting transforms how real estate portfolios grow by anchoring loan approvals directly to the income potential of individual assets. In removing debt-to-income hurdles and personal tax review, investors gain a streamlined mechanism for acquiring properties based on real market revenue. And with the market slowing down, those in a position to capitalize on buyers being in a stronger position should consider this an appealing option.

The post Understanding DSCR loans: How cash-flow underwriting works for rental properties appeared first on Griffin Funding.

Bear in mind that these figures are dependent on median house prices in a given area, meaning that some regions have even higher CCLs. For instance, in Los Angeles County, the two-unit limit now sits at $1,599,375.

The Reality of Two to Four Unit Conforming Loan Limits

Conventional financing through Fannie Mae and Freddie Mac relies heavily on strict baseline thresholds that set caps based on property size. As mentioned, the standard caps allow up to $1,066,250 for two-unit properties and $1,601,750 for four-unit properties across standard cost areas. High-cost markets offer elevated ceilings, but accessing those funds takes even more time and involves additional bureaucracy.

Even when falling below the CLL threshold, agency guidelines impose severe restrictions on the borrower behind the loan. Traditional lenders evaluate personal W-2 income, demand two years of full tax returns, and hold borrowers to a debt-to-income (DTI) ceiling that tops out between 45% and 50% depending on how the loan is underwritten. The long-standing rule of thumb is tighter still: the 28/36 rule puts housing costs at 28% of gross monthly income and total debt at 36%.

The central problem with this traditional model is how banks calculate rental income. Most conventional underwriters cut projected lease revenues by 25% for vacancy buffers, then offset that against existing personal debts.

When writing off legal tax deductions to optimize annual real estate cash flow, tax returns will show artificially lowered net income. This accounting practice works great for reducing tax obligations, but it inadvertently destroys personal DTI calculations for future conventional acquisitions.

Cash-Flow Underwriting as a Means of Shifting Focus to Property NOI

Debt service coverage ratio (DSCR) financing completely reframes how lenders evaluate investment risk by shifting focus away from personal paychecks. Instead of analyzing W-2s, cash-flow underwriting evaluates whether the asset generates enough gross rental income to cover its own monthly principal, interest, taxes, and insurance (PITI).

When scaling a multi-family portfolio, real estate investors can utilize cash-flow-based DSCR loans to qualify based on property rental revenue rather than personal debt-to-income ratios. This fundamental shift removes the personal income ceiling entirely. A DSCR loan allows multi-unit investors to qualify based purely on the building’s gross rental income, skipping personal DTI limits and tax returns entirely.

DSCR is calculated by dividing gross rental income by the cost of servicing the debt, which in this case is made up of PITI. So, for example, a property generating $10,000 per month in lease revenue against a monthly total mortgage payment of $8,000, yields a DSCR of 1.25. Lenders generally look for a ratio of at least 1.0 to approve financing without demanding personal income documentation, with the strongest pricing reserved for ratios at 1.25 and above.

Comparing Financing Structures

Choosing the right debt structure depends on whether borrowers prioritize raw leverage or rapid portfolio expansion. Investors evaluating multi-unit options generally consider three main trade-offs. Agency loans offer lower interest rates but enforce strict personal DTI limits and maximum property counts. DSCR financing skips tax return verifications entirely by focusing strictly on property lease performance, and cash-flow loans streamline closing timelines because underwriters analyze real estate appraisals rather than personal tax histories.

Because DSCR loans evaluate the real estate entity itself rather than a borrower’s personal paycheck, properties can be acquired directly inside an LLC or asset protection trust from day one. This avoids the deed transfer headaches and due-on-sale triggers common with conventional agency financing.

Expanding Strategically

Relying exclusively on conventional agency loans can eventually force real estate investors to hit a wall created by paper income limits. While conforming financing offers competitive long-term interest rates for initial acquisitions, scaling a sustainable two to four-unit portfolio often requires shifting to asset-based debt solutions. Leveraging cash-flow underwriting means active real estate investors can continue acquiring cash-flowing multi-unit assets based on the financial merits of the buildings themselves, maintaining steady momentum regardless of tax return adjustments.

The post Scaling multi-unit real estate: Conforming loan limits vs. cash-flow financing appeared first on Griffin Funding.

The calculation is straightforward.

DSCR = gross monthly rent ÷ monthly PITIA

PITIA includes principal, interest, taxes, insurance, and applicable HOA dues. DSCR loans finance investment properties, not primary residences.

What Is a DSCR Portfolio Loan?

A DSCR portfolio loan uses rental income to finance one or more properties in an investor’s portfolio. Does that mean every property sits under one blanket loan? Not necessarily.

Griffin Funding typically structures DSCR loans property by property. That approach may let you sell or refinance one rental without affecting financing on the others. 

DSCR Portfolio Loan vs. Blanket Loan vs. Portfolio Lending

“Portfolio loans” can refer to three different financing structures. A blanket loan places several properties under a single note, reducing the number of payments but linking the assets together. Selling or refinancing one property may require changes to the entire loan. In the technical sense, portfolio lending describes loans that a lender keeps rather than sells, giving it more freedom to set underwriting standards outside agency guidelines. A DSCR portfolio loan typically works differently: each rental is financed separately based on its own income. Griffin Funding uses this property-by-property structure, allowing investors to sell, refinance, or add an asset without affecting the rest of the portfolio. Learn more about how investors build a rental portfolio with DSCR loans.

Who Uses DSCR Portfolio Financing?

A DSCR loan can fit investors whose property performance is clearer than their taxable income. Who tends to use it?

• Self-employed investors with substantial tax deductions
• Owners carrying several financed rental properties
• Investors purchasing or refinancing through a U.S. LLC
• Long-term or short-term rental operators adding another property

The key difference? No tax returns, W-2s, pay stubs, or personal DTI.

That can be useful when depreciation and other deductions make taxable income look lower than the portfolio’s actual cash flow. The lender can instead evaluate the proposed rental through its rent, PITIA, value, and leverage.

How Lenders Evaluate a Rental Portfolio

When evaluating a rental portfolio, underwriters typically review the following:

1. Gross monthly rent and monthly PITIA
2. DSCR, supported by the lease or appraiser’s market-rent analysis
3. Credit score, down payment, and resulting LTV
4. Appraised value, property type, reserves, and LLC documents

Griffin Funding lists a 620 minimum credit score and no minimum DSCR requirement, subject to underwriting, with sub-1.0 ratios funded when reserves support the deal and a no-ratio option available. Most borrowers should plan for 20% down. A 15% down payment may be available with 740+ credit on eligible loans up to $1 million.

What can change the decision? Lower appraised rent, higher taxes or insurance, thin reserves, or weaker DSCR may reduce the available LTV. Conventional programs also apply financed-property and reserve rules to investors with multiple properties, which helps explain why some portfolio builders consider rental portfolio financing.

DSCR Portfolio Loan Example

Suppose an investor adds a rental with $3,500 in gross monthly rent and $2,800 in monthly PITIA.

DSCR = gross monthly rent ÷ monthly PITIA

$3,500 ÷ $2,800 = 1.25 DSCR

Put plainly, gross rent equals 125% of the property’s monthly principal, interest, taxes, insurance, and applicable HOA dues. Sounds comfortable, right? Keep in mind that this calculation does not account for several operating expenses.

• Vacancy
• Maintenance and repairs
• Property management
• Owner-paid utilities

DSCR Portfolio Loan Benefits and Trade-Offs

A DSCR loan may help investors grow without making tax returns, W-2s, pay stubs, or personal DTI the main qualification story.

Potential benefits include:

• Qualification centered on property income
• LLC borrowing, subject to underwriting
• Long-term and short-term rental eligibility
• Financing that may remain useful as a portfolio grows

The trade-offs of DSCR financing matter too:

• Rates historically ran above conventional, though agency investment-property pricing adjustments have narrowed the gap.
• Down payment and reserves still affect loan terms
• Weaker DSCR may reduce available LTV
• Appraised rent may fall below projections
• Short-term rentals may require additional market support

The post DSCR Portfolio Loan: Financing Rental Properties With Rental Income appeared first on Griffin Funding.