The Quick Read: A DSCR lender typically counts the lower of the signed lease and the appraiser’s 1007 market rent, so an above-market lease does not raise your ratio while a below-market lease can pull it down, although the exact rule is a program convention that varies by lender and not a federal requirement. Across the wholesale network Lendmire works with, that lower-of approach is the common one. A minority of programs lean on the actual lease instead, so the program matters.
- An above-market lease gets capped at the appraiser’s figure.
- A below-market lease usually becomes the number that sets your coverage.
- A vacant property has no lease, so the appraiser’s market rent is the only figure.
- The 1007 is an opinion built from comparable rentals, not a record of what you collect.
- Clearing a coverage threshold is not the same as positive cash flow.
The honest answer on who each figure serves is simple. The signed lease is the better anchor for an investor with a documented, long-standing tenant paying near market. The 1007 market rent is the figure that matters most for vacant purchases, value-add deals, month-to-month tenants, and any file where the lease looks out of line with the neighborhood. Most files involve both numbers, and the lower one tends to win.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Side-by-Side
The table below compares the two figures on the features that change how a file is reviewed. It describes published industry norms and common network practice, and individual programs differ.
| Factor | Signed Lease | 1007 Market Rent |
|---|---|---|
| Review basis | Rent the tenant actually pays | Appraiser’s opinion from comparable rentals |
| Documentation | Lease, plus a rent roll on multi-unit | Form 1007 (one unit) or Form 1025 (2-4 units) |
| Property types | Occupied properties only | Occupied or vacant |
| Entity vesting | Same treatment, individual or LLC | Same treatment, individual or LLC |
| Timing in the file | Supplied by the borrower up front | Arrives with the appraisal report |
| Reserve expectations | Unchanged by this choice | Unchanged by this choice |
| Main risk | Above-market rent gets capped | Opinion may land below your estimate |
Entity vesting does not change which rent figure counts, though LLC-titled borrowers are subject to lender program eligibility. Reserves also do not move with the rent figure. They vary by lender, leverage, loan size, and transaction type. They commonly run around 6 months of PITIA, and loans above $1,500,000 typically step up to about 9 months.
When the Lease Is the Better Fit
The signed lease works best when it sits at or near market and is well documented. Then it confirms the appraiser’s number instead of fighting it. A long-tenured tenant with a clean payment record and a lease that matches nearby rentals gives the underwriter two figures that agree. That is the easiest file to review.
Some programs also count actual lease rent even when it exceeds the appraisal figure. They are the exception, so an investor who plans around an above-market lease should confirm the program’s rule before the appraisal is ordered. If a lease is the stronger evidence in your file, ask which program treats it that way and what leverage and credit tiers come with it.
The lease also matters in the opposite direction. A below-market lease is often the figure that sets coverage, even when the comps would support more rent. A legacy tenant paying under market can cap the ratio, and on a cash-out refinance that can limit proceeds. Cash-out on an investment property tops out around 75% LTV across most of the network, with about 6 months of seasoning as the common expectation. When the lease is the lower number, renewing at market rent before the appraisal is ordered is usually the cleanest fix, if the tenant agrees. Lendmire’s piece Lease Rent vs 1007 Market Rent on a DSCR Cash-Out Refinance covers that situation in detail.
Picture an investor with a duplex and a tenant who has renewed at the same rent for years. The lease says one thing and the appraiser’s per-unit rents say another. The lower figure carries the file, and the investor may be better off renewing both leases at market before ordering the appraisal.
When the 1007 Market Rent Is the Better Fit
Market rent is the better fit whenever there is no reliable lease. That includes vacant purchases, newly renovated properties, and rentals with a month-to-month tenant. On a vacant property the appraiser’s figure is the only rent in the file, so a signed lease is not needed to move forward.
A new lease signed just before applying helps only if the appraiser’s independent opinion also supports that rent. Underwriters look closely at last-minute leases, and a lease that outruns the comps usually gets capped. A month-to-month arrangement is typically treated as a weaker file, and the underwriter may lean on market rent.
The 1007 also protects you from your own optimism. If you price an acquisition on the in-place rent, an above-market tenant can make the deal look better than it will underwrite. Treat any pre-appraisal ratio as an estimate. The appraisal produces two separate numbers: value drives LTV, and rent drives coverage.
The tradeoff is that you do not control the opinion. It can come in under what you advertise, especially in thin rental markets. Sending the appraiser your own rental comparables can help. Asking the lender which appraiser and comp pool it uses is a reasonable question too.
How the 1007 Rent Gets Built
The 1007 is the Single-Family Comparable Rent Schedule. Fannie Mae’s appraiser guidance describes it as the form an appraiser uses to document estimated monthly market rent for a single-family investment property, and it can also be used for condos. In agency lending it is required only when rental income is used to qualify a one-unit investment property. DSCR programs borrow the format, but the agency rules do not govern them. That is the only contrast worth drawing, since the lower-of convention is a DSCR program practice.
The appraiser pulls comparable rentals and adjusts them for size, condition, bedrooms, and location. BiggerPockets describes the result as what you could reasonably rent the home for if it were listed today, and says appraisers typically start from about three nearby rented properties. McKissock lists the inputs as location, condition, year built, property type, size, any existing lease agreements, and comparable rents. It also notes that the lender decides which income to use.
Form 1025 covers two to four units and gives a per-unit rent figure inside the same report. Lendmire also lists Form 216 as the operating income and expense form for already-leased 2-4 unit properties. Buildings of five or more units often shift toward net-operating-income, small-balance-commercial-style review. That is a different track from the one described here.
Edge Cases That Change the Answer
Short-term rentals strain the 1007 because it measures monthly long-term rent. McKissock explains that nightly rentals include furniture and equipment and run on booking terms instead of a lease. Multiplying a nightly rate by 30 is not a valid market rent. Short-term-rental files usually rely on hosting history and market data, and lenders typically discount projections. On a purchase, STR leverage tops out at 75%. Expect a 640+ score and about 12 months of hosting history. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
A lease expiring during a refinance is its own problem. A renewal at market rent before the appraisal is ordered is the cleanest fix. A rent increase helps only where the program counts actual lease rent. Related leases and unusual structures, such as furnished rentals or leases with concessions, tend to draw extra attention.
For a mixed file, the comparison happens per unit on 2-4 unit properties. A lease can be above market on one unit and below it on another, and each unit stands on its own evidence.
Run the Numbers Without Dollars
Rent is divided by PITIA, the full monthly obligation of principal, interest, taxes, insurance, and any HOA dues. The ratio makes the comparison easy to see. These examples are hypothetical coverage ratios, not market data.
Say the signed lease would produce coverage near 1.25x and the appraiser’s market rent produces about 1.10x. The lender counts the lower figure, so the file underwrites near 1.10x. The extra rent in the lease did nothing.
Now flip it. A below-market lease produces about 0.95x and the comps support 1.10x. The file typically underwrites at the lower figure. 1.00 is where many select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. That path is a structural choice to weigh, not a fallback, because the adjusted terms cost something. If the number sits below 1.00 only because of a stale lease, renewing at market first may be the better move.
A larger down payment lowers the monthly obligation and can lift the ratio. It does not change which rent figure counts, and it does not erase leverage caps, credit floors, reserve rules, or property eligibility. Purchase files on investment properties typically land at 75%-80% LTV, and select high-leverage programs reach 85% LTV with roughly a 700+ score. A 620 credit floor exists in parts of the network, most programs want around 660, and 700+ opens the strongest tiers.
Clearing the threshold also does not mean the property cash flows. DSCR compares rent to PITIA only, so repairs, vacancy, management, utilities, and capex sit outside the calculation. 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.
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.
Where Most Investors Get It Wrong
Investors often assume the signed lease is the rent number. On most programs it is capped at the appraiser’s figure. Underwriting does not pick whichever figure helps you, and it tends to do the opposite.
A second misreading is that a rent-estimator site or a seller’s pro forma counts. Listing estimates and pro formas carry little weight against an appraisal. A third is that the 1007 is a DSCR-specific form. It is borrowed, as covered above.
The last one is that every program uses the lower figure. For a broader view of how programs fit together, Lendmire’s complete DSCR loans guide covers the mechanics.
Key Terms Defined
- Signed lease: the written agreement showing the rent a tenant has agreed to pay.
- 1007 market rent: an appraiser’s estimate of monthly rent for a single-family property, built from comparable rentals.
- Form 1025: the appraisal form that covers two to four units and gives a per-unit rent figure.
- PITIA: principal, interest, taxes, insurance, and any HOA dues, the monthly obligation that rent is measured against.
The Verdict
Neither figure wins on its own. The lower of the two tends to decide the file, so the useful question is which one is likely to be lower for your property. If you hold a documented lease near market, the lease and the 1007 should agree and the comparison matters little. If you hold a vacant property, a month-to-month tenant, or a lease that looks off from the comps, plan around the appraiser’s number.
Underwrite to the likely 1007, not the best-case lease. Fix a stale below-market lease before the appraisal if you can. If the numbers only work at your lease, that is a signal to revisit the deal, the leverage, or the program.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a DSCR-focused mortgage broker arranging investor loans through select lenders across 41 markets including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. You can reach the team at 828-256-2183 or request a quote. Qualification is subject to lender guidelines and is not a commitment to lend.
Frequently Asked Questions
Does a lease above market rent raise my DSCR?
Not on programs that use the lower figure, which is the common convention. The appraiser’s number caps the rent used in the ratio. Some programs count the actual lease, so check the specific guidelines before relying on a higher lease to carry a deal.
Which appraisal form applies to a duplex?
Form 1025 applies, because it covers two to four units and gives a per-unit market rent inside the appraisal report. Form 1007 is the single-family rent schedule. Buildings of five or more units often move to commercial-style review.
What happens if the property is vacant?
The appraiser’s market rent is the only rent figure, so it sets the ratio. A signed lease is not needed before closing on a vacant purchase. A lease signed just before you apply helps only if the appraisal also supports that rent.
Can I use short-term rental income instead of the 1007?
Sometimes, through programs built for short-term rentals. The 1007 measures long-term monthly rent, so STR files usually rely on hosting history and market data that lenders tend to discount. Programs typically expect a 640+ score and about 12 months of hosting history.
What can I do if the 1007 comes in lower than I expected?
Start by asking whether the appraiser can review additional rental comparables you supply. If the lease is the lower figure, renewing at market rent can help. If neither works, consider lower leverage or a select-lender structure for coverage below 1.00, with terms adjusted.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae, Appraiser Update
2. BiggerPockets, Real Estate Investor Financing 101: The 1007 Form
3. McKissock Learning, Form 1007 and short-term rental appraisals
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Scale From 5 to 20 Rentals Using DSCR Loans · Lease Rent vs. 1007 Market Rent for a BRRRR DSCR Takeout · How Much Cash-Out a DSCR Lender Releases on a Paid-Off Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.