The Quick Read: On a purchase, you do not need a signed lease, because the appraiser’s market-rent opinion stands in as the qualifying income, subject to lender guidelines. The appraisal sets the rent figure, the lender divides it by the full monthly obligation, and the property must be rentable today. Refinances are where the rule tightens, so the transaction type matters most.
- Purchase: a vacant, turnkey property can qualify on appraised market rent.
- Refinance: many programs want a lease or an operating history, and some accept vacant. Confirm in writing.
- Condition: the property must be rent-ready, not mid-rehab.
- Leverage: most purchase files land at 75%-80% LTV on an investment property, subject to credit and reserves.
- Cash flow: clearing the coverage ratio is not the same as making money. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
A vacant rental looks like a dead end on paper. Zero tenants seems to mean zero income, and zero income seems to mean no ratio. That logic would hold if the lender used your tenant’s paycheck or your own. It doesn’t. This guide walks through what replaces the lease, how the numbers work, and where the general rule breaks. For the full picture of how these loans work, see the complete DSCR loans guide.
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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.
Key Terms Defined
DSCR (debt service coverage ratio): monthly rent divided by the full monthly housing obligation. It tells the lender whether the property’s income covers its own payment.
PITIA: principal, interest, taxes, insurance, and HOA dues where they apply. This is the denominator in the ratio.
Market rent: what comparable rentals nearby are leasing for, as estimated by an appraiser rather than claimed by the owner.
LTV (loan-to-value): the loan amount as a percentage of the property’s appraised value or price.
Seasoning: how long you have owned a property before a lender will refinance it.
Rent-ready: a property that could be handed to a tenant today, with working utilities, finished repairs, and no open construction.
Why a Missing Lease Looks Like a Problem (and Isn’t)
A DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The income that counts is the property’s, not yours. So the real question is not whether a tenant exists. It is whether a credible third party can document what the property would rent for.
That third party is the appraiser. DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. Pay stubs and W-2s are not the test. Credit, reserves, leverage, and the property’s rent are.
Across the wholesale network Lendmire works with, vacant purchases are routine. Lenders mostly care about two things: is the property in turnkey condition, and does the appraised rent clear the program’s coverage floor.
How the Appraiser’s Market Rent Replaces the Lease
The lender orders a full appraisal that does two jobs. It sets the value, which drives LTV. It also sets market rent, which drives coverage. For a single-family home or one-unit condo, the rent opinion comes on a rent schedule form. The form is published as Freddie Mac Form 1000 and Fannie Mae Form 1007, and the appraiser prepares it as an attachment to the appraisal. Two- to four-unit properties use a different form, 1025, which breaks out rents by unit.
Here is how the appraiser gets to a number:
1. The appraiser picks comparable rentals near the property.
2. They adjust only for significant differences between those comps and your property.
3. They reconcile everything to one monthly market-rent figure as of a stated date.
You do not supply the number. Your own research, a listing site estimate, or a broker’s guess is not the qualifying figure. Those help you decide what to offer. The appraisal decides what the lender uses.
One point of context. The agency world requires this form when rental income is used to qualify on a one-unit investment property, per the Fannie Mae Selling Guide. DSCR loans are not agency products. The non-QM market borrowed the form names as a convention, and the lender decides how to use the output. As McKissock, an appraisal education provider, explains, the appraiser produces the opinion and income ultimately falls under the lender’s scope.
With no lease, there is also no lower-of-lease-or-market test. Where a lease does exist, many programs use the lower of the two, so a lease above market does not raise your number. A vacant file simply uses the appraisal.
Purchase vs. Refinance: Where the Rule Splits
This is the biggest break in the general rule. A purchase can usually close vacant. A refinance often cannot.
| Factor | Vacant Purchase | Vacant Refinance |
|---|---|---|
| Income used | Appraiser’s market rent | Varies by program |
| Lease needed? | Usually no | Often yes, or operating history |
| Condition | Turnkey, rent-ready | Turnkey, rent-ready |
| Ownership test | None | Seasoning applies |
| Cash-out ceiling | Not applicable | Around 75% LTV on a standard rental |
Why the difference? On a purchase, the lender is underwriting a fresh start. There is nothing to look back on, so projected rent is the logical measure. On a refinance, the lender can ask what the property actually did. Many programs want to see a lease or a real operating record. Some will accept a vacant property with the appraisal rent. Programs differ, so confirm with the lender before you plan around it.
Seasoning is a separate test from vacancy. On a cash-out refinance, about 6 months of ownership is the common expectation across most of the network. A property can be vacant and seasoned, or leased and unseasoned. Do not blur the two.
Scenario Table: What Usually Works
| Situation | Typical Treatment |
|---|---|
| Vacant, turnkey purchase | Appraised market rent |
| Freshly finished rehab, purchase | Appraised market rent |
| Vacant refinance | Program-dependent; confirm first |
| Between tenants, refinance | Often needs a recent lease or history |
| Lease signed, no rent paid yet | Lease plus appraisal; lower figure usually governs |
| Former primary residence converted | Appraised market rent |
| Multi-unit, some units vacant | Per-unit rents; heavy vacancy may be treated as vacant |
| Mid-rehab, not rentable | Not a fit for a rent-based DSCR loan |
A few of these deserve a note. A former home you lived in has no third-party lease, so market rent carries the whole file. Month-to-month and related-party tenancies sit in a gray zone between no lease and leased, and lenders treat them case by case. A multi-unit building that is mostly empty will likely be handled like a vacant property, though that call belongs to each lender.
A Worked Example: Pass, Borderline, Fail
Run the numbers on a vacant duplex bought at 75% LTV on an investment property. The mechanics are the same every time, only the appraised rent changes. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
- Scenario one: the appraisal rent comes in strong and the coverage ratio lands around 1.25x. That clears a 1.00 floor with room to spare and may support better pricing and leverage.
- Scenario two: the appraised rent is slightly lower and coverage sits near 1.02x. It clears 1.00 by a hair. Any change in taxes or insurance could push it under.
- Scenario three: the appraiser reconciles to a lower figure and coverage drops to roughly 0.92x. Here 1.00 is where many select programs start, so this file needs a different path.
That different path exists. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. It is a separate lane from the standard 1.00 programs, not a lower floor on the same product.
Nothing about you changed between those three files. Your credit, reserves, and down payment stayed put. One opinion moved, and the ratio moved with it. That is why you should treat any pre-appraisal estimate as a range, not a promise.
What If the Appraised Rent Comes In Low?
The routes to a higher number are narrow. You can request a formal reconsideration of value with comp-level evidence, meaning actual leased rentals the appraiser did not weigh. You can sometimes pursue a second appraisal, though that costs money and carries no guarantee. Your own spreadsheet will not move the number.
You can also adjust the file instead of the rent. A larger down payment lowers the monthly obligation and can lift the ratio. But it never erases other limits. Leverage caps, credit floors, reserve rules, and property eligibility still apply. The strongest files clear both tests: enough equity and enough rental coverage.
The better move is to avoid the surprise. Before you go under contract, pull recent leased comparables yourself, for similar size, condition, and location. Quote the rent as a range until the appraisal lands.
Is It Rent-Ready? A Pre-Appraisal Checklist
Condition is a separate gate from occupancy. A vacant property can qualify. An unfinished one generally cannot. Before the appraiser visits, confirm:
- Utilities are on and every system works.
- Finished flooring, paint, kitchens, and baths.
- No open permits or active construction.
- Safe access, working locks, and smoke detectors in place.
- Clean, photographed, and presentable as a listing.
If the property still needs heavy work, a short-term bridge loan followed by a DSCR refinance once it stabilizes is a common structure. Then the refinance rules above apply, so ask about vacancy before you start.
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.
The Step-by-Step Process
1. Pre-screen the file. Share the property, your credit profile, and your reserves with a broker so the scenario is matched to a fitting program.
2. Run rent comps before contract. Know your likely range.
3. Go under contract and order the appraisal with the rent schedule.
4. Gather documents: identity and credit documentation, asset and reserve statements, entity papers if closing in an LLC (subject to lender program eligibility), and the appraisal. No pay stubs or W-2s. Some programs may ask for a short letter of explanation on a vacant property.
5. Review the appraised rent and the resulting coverage ratio.
6. Finalize with the lender’s conditions satisfied.
On what you need to qualify, here is how the network generally looks. Purchase leverage mostly runs 75%-80% LTV on an investment property, and select high-leverage programs reach 85% with roughly a 700+ score. Reserves vary by lender, leverage, and loan size. Around 6 months of PITIA is common, stepping up to about 9 months on loans above $1,500,000. Standard programs run up to $3,000,000. All of this is subject to lender guidelines and individual underwriting.
Vacancy during lease-up matters here. A vacant purchase still has no income until you place a tenant. Reserves are what carry you through that stretch.
What DSCR Does Not Tell You
Clearing 1.00 is not positive cash flow. The ratio compares rent to PITIA and nothing else. Repairs, vacancy stretches, management, utilities, and capital expenses sit outside the calculation.
On a vacant start this gap is widest. You will carry the full obligation until the first rent check arrives, and you may spend on turnover items too. Budget for that separately. A file can pass underwriting and still run tight in month one.
Short-Term Rentals Play by Different Rules
If you plan to run the property as an Airbnb-style rental, the rent schedule form does not do the job. Per Fannie Mae’s appraiser update, Form 1007 was not designed for short-term rentals. Nightly rate times 30 is not valid market rent.
STR files are documented differently, usually with hosting history. In this network, STR purchases go up to 75% LTV, refinances run around 70%, and cash-out reaches 70%. Expect a 640+ score and about 12 months of hosting history, with a 1.00 coverage floor on both purchases and refinances. A property with no booking record is a harder fit, so read Lendmire’s piece How to Finance a Short-Term Rental With No Booking History Yet.
Why You’ll See Conflicting Advice
Some sources say you need a tenant. Others say you don’t. Both are partly right. The difference is transaction type and lender overlays. Purchases lean toward appraised rent. Refinances lean toward leases and operating history. Different lenders draw those lines in different places, even from the same appraisal.
Questions to Put to a Lender in Writing
- Do you allow a vacant property on a purchase, and on a refinance?
- Is a lease or operating history required for a cash-out?
- What seasoning do you require?
- How do you use the appraisal rent when no lease exists?
- What coverage floor applies, and how do leverage and pricing change as it moves?
- How many months of reserves apply to this loan size?
- What happens if the appraisal rent comes in low?
Get the answers in writing before you start a rehab or sign a contract.
Frequently Asked Questions
Can I get a DSCR loan on a vacant property?
Usually yes on a purchase, as long as the property is turnkey and rentable. The appraiser’s market-rent opinion supplies the income figure. Refinances are less uniform, so confirm the program’s vacancy rules first.
Do I need a signed lease at closing?
Typically not on a purchase. The appraisal rent replaces the lease. If you do have a lease, many programs use the lower of the lease and the market rent, so an above-market lease will not raise your number.
Can I use my own rent estimate instead of the appraisal?
No. The rent used for lender review comes from the appraiser’s report. Your estimate is useful for choosing what to offer, but it is not the figure the lender uses.
What if the property is a former home I lived in?
Market rent carries the file, since there is no third-party lease. The property must be a non-owner-occupied investment going forward, and the program must allow the conversion.
Does a passing DSCR mean the rental will be profitable?
No. The ratio only compares rent to PITIA. Repairs, vacancy, management, and utilities are not counted, so keep a separate budget.
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.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a broker arranging DSCR financing 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. Call 828-256-2183 or request a quote. Programs change and every file is underwritten individually; this is not a commitment to lend.
The cleanest vacant deals share one trait: the investor knew the likely rent range before the appraiser ever opened the door.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage brokerage specializing in DSCR investor loans, helping arrange financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. The model centers on property-level rental income reviewed by the lender rather than W-2 documentation, subject to lender guidelines, suiting entity-owned and multi-property investors. Lendmire holds Scotsman Guide Top Mortgage Workplace recognition for 2025 and 2026.
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References
1. Freddie Mac Form 1000 / Fannie Mae Form 1007
2. Fannie Mae Selling Guide B4-1.2-01
3. McKissock: 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 Get a DSCR Loan From Application to Closing · How to Calculate DSCR for a Rental Property in Five Minutes · How to Buy a Rental Property With a DSCR Loan From Offer to Keys
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.