The Quick Read: A lender builds qualifying income from the property’s booking history or a market projection. It then multiplies that income by a haircut factor and divides the result by the full monthly obligation. The haircut cuts the income side only, and the payment stays whole.
A short-term rental DSCR loan qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The lender takes documented or projected booking income, discounts it to stand in for vacancy and operating friction, and tests what is left against principal, interest, taxes, insurance, and HOA dues.
- The income basis is usually twelve months of platform, manager, or bank records, or a projection when there is no history.
- The haircut factor varies by program, so compare the method and the factor, not just the price.
- On the network’s short-term-rental programs, purchase leverage tops out at 75% LTV, and refinance or cash-out leverage at 70% LTV, subject to lender guidelines.
- The coverage floor is 1.00 on a purchase and 1.00 on a refinance, with a 640 credit score minimum.
- Clearing the ratio does not mean the property makes money.
Short-Term Rental Calculator
Run the STR 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 nightly rate, occupancy, taxes, and insurance for a more accurate picture.
Short-term rental income is documented with a 12-month history or a market data report. Program parameters update from Lendmire’s centralized guideline source.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Nightly rate, occupancy, taxes, and insurance are editable estimates. 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.
Why Does a Short-Term Rental Need Its Own Income Method?
A long-term rental has a lease or an appraiser’s market rent. A short-term rental has nightly bookings and no lease, so there is no single rent number to divide by the payment.
Many DSCR loans on a long-term rental use the appraiser’s market rent and compare it to the monthly obligation. That works because a lease is easy to read. A vacation rental that earns more in peak season than in winter does not fit a simple rent schedule.
Underwriters therefore ask a different question. They want to know what the property can reliably earn in a normal year. Then they ask whether a discounted version of that income still covers the payment.
Across the wholesale network, the answer depends on which records exist. A host with a year of bookings is read one way. A buyer with a house that has never been listed is read another way.
How Does Underwriting Build Qualifying Income, Step by Step?
Underwriting follows five steps: pick the income basis, annualize it, apply the haircut, divide by the payment, and then review everything else. Each step can move the final ratio, so it helps to know which levers you control.
Step 1: Choose the income basis. If the property has a hosting track record, the file leans on trailing twelve-month income. That means platform payouts, property-manager statements, or bank deposits. If there is no history, the file leans on the appraisal’s short-term-rent analysis or a market projection from a data service. Each program decides which of these it accepts.
Step 2: Annualize and divide by twelve. The lender totals a full year and divides by twelve to get a monthly figure. This is why peak months do not carry the file. A summer that runs hot gets averaged with a winter that does not.
Step 3: Apply the haircut. The lender multiplies the monthly figure by a factor below 1.00. I cover this step in detail in the next section.
Step 4: Divide by the payment. Residential DSCR is monthly qualifying income divided by monthly PITIA. PITIA is principal, interest, taxes, insurance, and HOA dues. It is not the commercial formula of net operating income over debt service. Select programs start at 1.00, which means qualifying income exactly matches the obligation. Stronger ratios open better pricing and leverage.
Step 5: Review the rest of the file. The appraisal sets value. Credit, LTV, reserves, and property eligibility are checked on their own. Local permission to operate as a short-term rental may also need documentation. Our complete DSCR loans guide covers those layers for any rental type.
What Is a Vacancy Haircut, Really?
A vacancy haircut is a percentage of gross income that the program counts as qualifying income. It is a discount on the top of the ratio, never an addition to the payment. Programs describe it in different words, but the mechanic is the same.
Some call it a vacancy factor. Others call it an expense factor or a variability discount. They all do one job. PITIA leaves out vacancy, seasonality, cleaning, platform fees, and management. The haircut stands in for those costs without asking you to itemize them.
That framing matters because many investors read the haircut as distrust. It is not a judgment of your revenue. It is a fixed discount applied to every file in the program.
Here is a clean illustration. These are modeled assumptions, not network figures. Say a property’s gross monthly income covers its PITIA at 1.25x. A program that counts 80% of gross turns that into 1.00x of qualifying coverage. The file lands exactly on the floor, with no cushion.
Now run the same logic backward. This gives you the break-even test. Divide your target ratio by the haircut factor to find the gross coverage you need.
| Haircut factor (illustrative) | Gross coverage needed for 1.00x |
|---|---|
| 90% of gross | about 1.11x |
| 80% of gross | 1.25x |
| 75% of gross | about 1.33x |
| 70% of gross | about 1.43x |
The same property looks different at each level. Take a house whose gross income covers PITIA at 1.40x. At a 90% factor it shows 1.26x. At 80% it shows 1.12x. At 75% it shows 1.05x. At 70% it drops to 0.98x, which is below the 1.00 floor on the standard path.
One house, one set of bookings, and four different outcomes. That is why two programs can read the same file and disagree.
Which Income Source Does the Lender Use?
Lenders use one of three sources: trailing twelve-month history, platform or bank records that support it, or a market projection. A fourth input, the appraiser’s short-term-rent analysis, appears on some purchase files. Each has a strength and a weak spot.
| Income source | Best for | Weak spot |
|---|---|---|
| Trailing 12-month statement | Properties with a hosting record | Partial or uneven years |
| Platform, manager, or bank records | Proving the statement is real | Needs clean, complete exports |
| Market projection (AirDNA-style) | Purchases with no history | Model error in the comp set |
| Appraisal short-term-rent analysis | Purchases and conversions | Forms were built for leases |
When both history and a projection exist, actual history is usually the stronger evidence. A projection is a model, while bookings are facts. If the two conflict, expect the lender to lean toward the lower, better-documented figure.
The network’s short-term-rental programs expect about 12 months of landlord or host experience. That is separate from the property’s own history. A borrower with a first short-term rental may still qualify on a projection or appraisal basis, subject to lender guidelines.
Our piece What Counts As Short Term Rental Income For A Lender? goes deeper on which records carry weight.
Does Purchase Versus Refinance Change the Math?
Yes. A purchase usually leans on projected or appraised income. A refinance usually leans on actual operating records. Leverage and coverage floors are set separately for each.
On a short-term-rental purchase, leverage runs up to 75% LTV on the strongest files, with a 1.00 coverage floor. On a short-term-rental refinance or cash-out, leverage runs up to 70% LTV, with a 1.00 floor as well. All of this is subject to lender guidelines, credit approval, and property review.
A refinance has an advantage. You have real bookings to show. A purchase has an advantage too. You can choose a property with the numbers in mind.
A cash-out refinance has one more wrinkle. A bigger loan means a bigger payment, which thins coverage. Taking more cash out can push a file under the floor even when the income has not changed. Our article Does Stronger Rental Income Raise Leverage on a Short-Term DSCR Refinance? covers that tradeoff.
Standard programs reach $3,000,000 in loan size. Smaller balances route through select lenders in the network.
What About the Agency Appraisal Forms?
The appraisal forms in the mortgage world were built for long-term rent, not nightly bookings. Fannie Mae’s Selling Guide calls for Form 1007, the Single-Family Comparable Rent Schedule, on one-unit investment properties. It calls for Form 1025, the Small Residential Income Property Appraisal Report, on two- to four-unit properties. Both measure market rent, not guest stays.
Agency qualifying also applies its own vacancy convention. A rental income training handout from MGIC describes a 25% vacancy factor on subject-property rent. That is the agency convention only. DSCR loans are non-QM products, and the haircut in a DSCR program is its own program-defined factor. Do not carry the agency number over.
This also explains why appraisal-only income can disappoint. A nightly rate multiplied by thirty is not a rent schedule. Lenders do not accept it as a stand-alone method.
Where Does the General Rule Break?
The step-by-step method holds on most files. It bends in six places: projection error, occupancy mix, market size, data lag, sub-1.00 coverage, and conversions. Know them before you price a deal.
Projection error. Vault STR, an STR consultancy, reports that independent tests put AirDNA’s Rentalizer 15–30% off actual results, usually on the high side. It suggests underwriting year one at 60–75% of the projection. That is one consultancy’s view, not an industry standard. It still shows why a lender discounts a projection.
Occupancy and rate errors. RentalRecon, an STR education site, says occupancy estimates tend to run slightly high and average daily rate slightly low. The errors can partly cancel out. It also notes that the published accuracy figures of 94.9% and 96.2% describe market-level aggregates, not projections for one property. Vault STR adds that blocked calendar days can be counted as demand.
Market size. RentalRecon says projections are more reliable in large markets with many comparable listings. They are less reliable in small or rural markets with limited history. A thin comp set makes a projection weaker evidence.
Data lag. AbodeCostSeg, a cost-segregation firm, says AirDNA metrics lag real time by roughly 30–60 days. It also says projections are less reliable for unusual properties. A lake cabin with a dock is harder to comp than a three-bedroom near a stadium.
Coverage below 1.00 and no-ratio. These are separate paths. Coverage of 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. That path still calculates a ratio and leans on compensating factors. A no-ratio structure skips the calculation. It is available only through select lenders, generally for borrowers who already own a primary residence.
Conversions and first listings. A long-term rental turned into a short-term rental has no booking history. The file depends on a projection or the appraisal’s analysis. The choice of method can decide whether the file clears coverage at all.
Property type matters too. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs. 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.
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.
Does Clearing 1.00 Mean the Property Makes Money?
No. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses all sit outside the calculation.
A file at 1.05x passes. A property at 1.05x with a hot tub, a cleaning crew, and a slow February can still lose money. The haircut absorbs some of that risk on paper. It does not turn the property into a profit.
Think of the ratio as a lender’s test, not an owner’s budget. Run your own operating numbers separately. Short-term rentals carry costs that long-term rentals do not, and those costs belong in your model even when they do not belong in the lender’s.
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.
Key Terms Defined
Qualifying income: The monthly figure the lender actually counts after choosing a source and applying the haircut.
Vacancy haircut: A program factor that counts only part of gross income, standing in for vacancy, seasonality, and operating costs.
PITIA: Principal, interest, taxes, insurance, and HOA dues, which together form the monthly obligation in the ratio.
TTM (trailing twelve months): The most recent full year of booking and payout records.
Projection: A model-based income estimate from a data service, used when a property has no booking history.
Coverage: Qualifying income divided by PITIA. A coverage of 1.00 means income exactly matches the obligation.
LTV (loan-to-value): The loan balance as a percentage of the property’s appraised value.
What Does the Decision Look Like in Practice?
Start with the records you already have, then test the ratio under a harsher haircut than the one you hope for. Treat the program’s factor as a variable you shop, not a fixed cost of doing business.
Use this checklist before you apply:
1. Gather twelve months of platform payouts, manager statements, or bank deposits if the property has history. 2. Compute gross coverage by dividing monthly gross income by the full PITIA. 3. Divide your target ratio by each program’s haircut factor to see the gross coverage you need. 4. Run a second version at a lower haircut to see how much cushion you have. 5. Check credit (a 640 score is the short-term-rental minimum), leverage, and reserves, which vary by lender, loan size, and transaction type. 6. Confirm local short-term rental permission for the specific property.
Consider a buyer comparing two programs on one house. The first counts a higher share of gross income. The second counts less but offers more leverage. The better choice is the one where the property clears coverage and the cash needed still fits the plan. A larger down payment lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility.
The strongest files clear both tests. They have enough equity and enough rental coverage.
Next Steps
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. Lendmire is a broker arranging financing through select lenders in its wholesale network, covering 41 markets, including Washington, D.C. Programs change, and every file is underwritten individually by the lender.
Frequently Asked Questions
Does the haircut reduce my payment or my income?
It reduces your income. The lender counts only a portion of gross income, then divides that figure by the full, unchanged payment. Your payment never shrinks because of the haircut.
Can I qualify if the property has no booking history?
Often, yes, through a projection or the appraisal’s short-term-rent analysis, subject to lender guidelines. Expect the lender to discount a projection. The network’s short-term-rental programs also look for about 12 months of landlord or host experience from the borrower.
Which wins if my projection and my actual bookings disagree?
Documented bookings usually carry more weight than a model. If history comes in below the projection, expect the lower figure to drive the file. If history is higher, the lender may still limit credit to what the program allows.
Is a haircut a sign the lender doubts my revenue?
No. It is a standard discount applied to every file in the program. It stands in for vacancy, seasonality, and costs that PITIA leaves out.
Can coverage fall below 1.00?
Select lenders in the network offer a path below 1.00, with leverage and terms adjusted. The standard short-term-rental floor is 1.00 on both purchases and refinances. A no-ratio structure is available only through select lenders, generally for borrowers who already own a primary residence.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
2. MGIC rental income training handout
3. Vault STR: AirDNA Rentalizer accuracy
4. RentalRecon: AirDNA Rentalizer analytics
5. AbodeCostSeg
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Luxury Rental DSCR Loan Works in Dallas · How a Beverly Hills Luxury Rental DSCR Loan Works · How Much You Can Borrow for a No-Ratio DSCR Loan on Short-Term Rental Properties
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.