The Quick Read: Usually not, because a low 1007 rent schedule rarely ends the refinance outright, but it can shrink the loan, trim the cash you pull out, or push the file into a different structure, since the appraiser’s market rent sets the coverage ratio while the appraised value sets the leverage limit. A weak rent figure is a coverage problem, and coverage problems are often fixable by resizing the loan.
- The lender’s appraisal produces two numbers: value and market rent. Each can cap the loan on its own.
- A rent miss lowers coverage, and a smaller loan lowers the payment, which lifts coverage back up.
- The cost of that fix is cash-out proceeds, which matters most when the bridge payoff already uses most of the 75% ceiling.
- A high value does not rescue thin rent, and a high ratio does not mean positive cash flow.
- Vacant properties, below-market legacy leases and short-term rentals are the files most exposed.
Why does a low 1007 matter so much on a BRRRR exit?
The 1007 matters because it supplies the rent half of the DSCR calculation. DSCR is monthly rent divided by the monthly obligation: principal, interest, taxes, insurance and any HOA dues. The appraised value drives the leverage limit, and the appraiser’s rent drives the coverage ratio.
DSCR Cash-Out Calculator
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Cash-out refinances across most of Lendmire’s wholesale network top out around 75% LTV on a standard rental, with about six months of ownership expected before cash-out is available. The cash-out loan is also larger than the bridge loan it replaces, so coverage gets tested on the bigger payment. Many BRRRR investors model the purchase, rehab and lease-up carefully and never stress the final rent number. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
The investor’s own after-repair estimate does not size the loan. The refinance lender orders its own appraisal, and that report is the only one that counts. The rent figure on that report is the appraiser’s opinion, built from comparable rentals, not the lease you hoped to sign or the asking rent in a listing.
What is the difference between a low 1007 and a low appraisal?
The two misses attack different parts of the file, and the fixes differ. A value miss cuts the maximum loan through the LTV ceiling. A rent miss cuts coverage and can move the file to a weaker pricing tier or below the program floor. Diagnose which number missed before you pick a fix.
| What missed | What it changes | Typical symptom | Usual fix |
|---|---|---|---|
| Value only | Maximum loan and cash back | Smaller proceeds, coverage fine | Bring cash, take less, or wait |
| Rent only | Coverage ratio and tier | Ratio near or under the floor | Shrink the loan or change program |
| Both | Loan size and coverage together | Small loan, thin coverage | Payoff-only structure or hold |
The asymmetry is the part investors miss. A smaller loan lowers the payment, so it lifts coverage. A high value, however, does nothing for thin rent, because the rent test and the value test run side by side. The strongest files clear both: enough equity and enough rental coverage.
This article stays on how the rent number resizes the loan.
Which rent number does the lender actually use?
On most DSCR files, underwriting typically uses the lower of the signed lease or the appraiser’s market rent. An above-market lease adds nothing, and a below-market legacy lease drags coverage down even when the market would pay more. A vacant property relies on the market-rent opinion alone.
| Occupancy situation | Rent figure that usually drives coverage |
|---|---|
| Vacant after rehab | Appraiser’s market rent only |
| Leased at market | Lease and market rent roughly agree |
| Leased above market | Market rent, since the lower number governs |
| Leased below market | The lease, which pulls coverage down |
| Month-to-month | Varies by program, so confirm early |
Pricing the unit low to fill it quickly is the common trap here. A discounted lease helps lease-up and then caps the ratio at refinance, so renewing or re-leasing at market before the application is the usual fix. Program treatment varies by lender, so confirm the rent-source rule before you set the lease.
Rehab choices also reach the rent figure. The appraiser adjusts for design, age and condition, so finished features that comparable rentals share can support the rent opinion, subject to the comps and the underwriter’s review.
How does a low 1007 resize the loan?
A rent miss shrinks the loan because the payment has to fall until coverage clears the program’s test. Since the payment moves roughly in proportion to the loan balance, a percentage shortfall in rent calls for about the same percentage cut in the loan to restore the same ratio.
Run the numbers on this modeled example. These are illustrative index values, not market data. Assume the investor’s plan produced coverage of 1.25x on the full cash-out loan, with rent indexed at 100.
- On plan: Rent holds at 100 and value holds. Coverage stays near 1.25x.
- Rent-only miss: The appraiser opines rent at 85. Coverage on the same loan falls to roughly 1.06x, which is near the floor for many select programs. Cutting the loan by about 15% restores roughly 1.25x.
- Value-only miss: Value comes in 10% low, so the 75% ceiling cuts the maximum loan by 10%. Coverage rises on the smaller payment, but cash back falls.
- Both: The loan drops 10% on value, and rent sits at 85. Coverage lands near 1.18x. The file may clear, but the proceeds are thinner than planned.
The formula behind this is simple. Coverage equals rent divided by the monthly obligation, so the loan size that supports a target ratio scales directly with market rent. Before you buy, work backward: take the rent a conservative appraiser would pick, divide by your target ratio, and see what loan that obligation can carry.
The bridge payoff matters most. If the payoff already consumes most of the 75% ceiling, there is little room to cut the loan. Then a rent miss does not trim your cash-out, it erases it and may leave only a payoff-only structure. That is the realistic version of “kill” in this title: the cash-out component can end while the refinance itself survives.
Key Terms Defined
1007: The single-family comparable rent schedule, an appraiser-prepared attachment that estimates the subject’s market rent from rental comparables. Fannie Mae’s learning center lists it by that name, and Freddie Mac publishes the same form as Form 1000. DSCR loans are not agency loans, so the industry simply borrows the form because it documents rent cleanly.
1025: The small residential income property appraisal report used for two- to four-unit properties. It reports rent per unit, so one weak unit can pull the total down.
Market rent: The appraiser’s estimate of what the property would rent for in the open market, built from rentals leased on a monthly basis.
PITIA: Principal, interest, taxes, insurance and association dues, the full monthly obligation in the DSCR denominator.
Seasoning: The ownership period before cash-out is available, about six months from title recording on most programs in the network.
Can you challenge a low 1007?
Sometimes, and the success rate depends on what kind of error you can show. Factual mistakes, such as wrong unit count, wrong square footage or omitted renovation features, are fixable with documentation. A disagreement over opinion is much harder to win.
Strong challenges share a few traits:
- Closed rental comps, not listings or asking rents, that the appraiser did not consider.
- A documented difference in features, condition or location between the appraiser’s comps and the subject.
- A request routed through the lender or broker, never sent straight to the appraiser.
Be honest about limits. An investor who argues that the comps feel wrong, without better comps, usually gets nowhere. The practical alternative in many cases is to lease the property at market first, then let the lease evidence support a re-review. Ordering a second appraisal elsewhere is a gamble with another fee attached, not a strategy.
What are your options when the rent comes in low?
You have five realistic paths, and each trades cash, time or leverage for coverage.
| Option | Best when | Trade-off |
|---|---|---|
| Take a smaller loan | Bridge payoff leaves room | Less cash out |
| Bring cash to close | You want to keep the structure | Capital tied up again |
| Payoff-only refinance | Cash-out no longer pencils | No equity pulled |
| Wait, re-lease, reappraise | Lease is below market | Bridge carry keeps running |
| Different program | Coverage is the sole issue | Leverage and terms adjust |
On that last row, 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted accordingly. Whether to use it is the better question than whether it exists. If the property has a real rent-growth story, a lower-coverage structure can be defensible. If you are reaching for it because the deal does not work at any reasonable rent, the signal points to the deal itself rather than the loan type.
Waiting carries a cost of its own. Every extra period on the bridge loan adds interest and fees, so a re-lease plan should come with a firm limit on how long the bridge can run.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
What changes for vacant units, short-term rentals and multifamily?
Vacant units depend entirely on the market-rent opinion, which makes the 1007 the whole file. A newly rehabbed, unleased property has no lease history to back it up, so the appraiser’s comps carry extra weight and an early exit leaves little rent-deposit evidence.
Short-term rentals are different. Fannie Mae’s June appraiser update says the form calls for an indicated monthly market rent, that comparables should be leased on a monthly basis, and that multiplying a nightly rate by 30 is incorrect. The form was not designed for short-term rental properties, so lenders decide separately how to count that income. Within Lendmire’s network, short-term rental refinances sit at lower leverage than standard rentals, with cash-out around 70%, and typically expect a 640+ score and about 12 months of hosting history.
On two- to four-unit properties, the 1025 reports per-unit rent together, so a weak unit can pull down the total even when the others are strong.
How do you protect the exit before you order the appraisal?
Protection starts before the purchase. Pull the rent comps a conservative appraiser would pick, not the lease you hope to sign, and run the takeout at that rent. Asking rent in a listing is not evidence, while a signed lease, rent-deposit history and closed comps are.
A short pre-check helps:
1. Classify the request as payoff-only or cash-out before ordering anything.
2. Set the lease at market, not under it, and avoid concessions that sit in the file.
3. Size the loan to the conservative rent, then treat any better result as upside.
4. Confirm credit, reserves and property eligibility, since a bigger down payment never erases those rules.
Typical credit expectations run about 660 on most programs, with a 620 floor in parts of the network and 700+ for the strongest leverage tiers. Reserves commonly run about six months of PITIA and step up to about nine months above $1,500,000, subject to lender guidelines. Lendmire’s complete DSCR loans guide walks through the full qualification picture.
One more point: clearing the coverage test is not the same as positive cash flow. The ratio compares rent to PITIA only, while repairs, vacancy, management, utilities and capex sit outside it. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Go, pause or pivot?
- Go when conservative rent clears your target coverage on the full loan and the 75% ceiling leaves room after the bridge payoff.
- Pause when the lease sits below market or the unit is vacant. Re-lease at market, build some payment history, then apply.
- Pivot when value and rent both miss. Consider a payoff-only structure, a lower-coverage program with adjusted terms, or holding the property longer before pulling equity.
Frequently Asked Questions
Can I use my lease instead of the 1007 rent?
Only when the lease is the lower number. Underwriting typically takes the lower of the signed lease or the appraiser’s market rent, so a lease above market does not lift coverage. A below-market lease does the opposite, which is why re-leasing at market often comes before the application.
Does a low 1007 hurt the cash-out or the payoff?
It hits the cash-out first. Thin rent forces a smaller loan to restore coverage, and the lost size comes out of your proceeds. If the bridge payoff already uses most of the 75% ceiling, the cash-out can disappear while a payoff-only refinance may still work, subject to lender review.
Can I order a second appraisal if the first rent is low?
You can try, but it is a gamble with another appraisal fee, not a plan. A second report may land elsewhere or at the same number. Closed comps and documented feature errors, submitted through the lender or broker, usually do more than a fresh appraisal.
Is coverage below 1.00 possible on a BRRRR exit?
It is available through select lenders in the network, with leverage and terms adjusted. Many programs start at 1.00, so a sub-1.00 file is a separate path, not a lower floor on the same program. Approval depends on credit, reserves and the property.
Does the 1007 decide my loan size on its own?
No. The 1007 sets rent, which drives coverage, while the appraised value sets the LTV ceiling. The loan is capped by whichever test is tighter, and the lender’s guidelines, credit profile, and reserves apply as well.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. As a broker, Lendmire arranges financing through select lenders in its wholesale network, across 41 markets including Washington, D.C., and nothing here is a commitment to lend.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Learning Center, Appraisers & Property Underwriting
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Cross-Collateral Line vs Super Jumbo DSCR Cash-Out: Equity and Risk · Do Fintech Rental HELOCs Allow LLC-Owned Properties? · Can You Get a DSCR Cash-Out Refinance When the Ratio Falls Below 1.0?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.