The Quick Read: Yes, on most purchases, as long as the projected rent comes from the appraiser’s market rent opinion and not from your own spreadsheet. A vacant or newly bought rental can qualify with no signed lease, so long as that appraised rent covers the full monthly obligation and the ratio meets the program’s minimum, subject to lender guidelines.
- The appraiser’s rent figure, not your pro forma, sets the ratio on a vacant purchase.
- Many select programs start at 1.00 coverage; stronger ratios open better pricing and leverage.
- If a lease exists, most programs use the lower of the lease and the appraised market rent.
- Short-term rentals follow a different path, with their own leverage and hosting-history expectations.
- Clearing 1.00 does not mean the property produces positive cash flow.
What “Projected Rent” Actually Means to a Lender
Projected rent means the appraiser’s documented opinion of what the property would rent for on the open market. It does not mean the number in your underwriting model, a listing-site estimate, or what the neighbor charges.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
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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.
The appraiser records that opinion on a rent schedule. For a single-family investment property, the form is the Single-Family Comparable Rent Schedule (Form 1007). Freddie Mac’s instructions for the matching form describe it as an attachment the appraiser prepares with the appraisal of a single-family investment property. For two to four units, the appraiser uses the small residential income property report (Form 1025) instead.
One clarification. These are agency-created forms. DSCR loans are non-agency business-purpose products, and the agencies do not set DSCR rules. Fannie Mae’s Appraiser Update says Form 1007 is required only when rental income is used to qualify a one-unit investment property in conventional lending. DSCR lending simply borrows the form because it is a familiar, standardized way to document market rent.
Key Terms Defined
DSCR (debt service coverage ratio): The property’s rent used for lender review divided by its monthly housing obligation.
PITIA: Principal, interest, taxes, insurance, and any HOA dues, which together make up the full monthly obligation.
Market rent: The rent the appraiser concludes the property would command from a new tenant today.
Rent schedule: The appraisal exhibit where comparable rentals and the market rent conclusion are documented.
Lower-of rule: Many programs credit the lesser of the signed lease and the appraised market rent.
How the Appraiser Builds the Number
The appraiser selects comparable rentals and adjusts only for significant differences between each comp and your property. The form’s instructions also call for comments on the rent range, vacancy, and rent trend, and say concessions are adjusted to the market rather than to the subject.
That matters for you. Comp quality drives the result. A thin set of comps, a mismatched unit count, or a missed feature can pull the figure down, and the lender treats the appraiser’s conclusion as the ceiling. Your own estimate carries no weight in the calculation, however well researched.
The same appraisal also produces a value. Value drives leverage and rent drives coverage, so a file can fail on either one. A strong rent opinion does not rescue a low value, and a strong value does not rescue thin coverage.
Which Rent Number Counts?
| Situation | Rent typically credited | Main risk |
|---|---|---|
| Vacant, rent-ready | Appraiser’s market rent | Low comps |
| Leased at market | Lower of lease and market rent | Little upside |
| Lease below market | Often the lower lease figure | Ratio pulled down |
| Lease above market | Market rent, not the lease | Overestimating income |
| Month-to-month or expired | Varies by program | Treated as vacant |
| Short-term rental | Program-specific projection | Haircuts, hosting history |
Across the wholesale network, the pattern is consistent: vacant means the appraiser’s number is the only number. Leased means most programs take the lower figure. An above-market lease does not help you, and a below-market lease can hurt even when the appraiser thinks the unit could rent for more.
The Math: Three Ways the Same Property Can Land
DSCR is rent divided by PITIA. The rent is the qualifying figure from the table above; PITIA is the full payment including taxes, insurance, and HOA dues.
Scenario one: comfortable. Rent used for lender review covers the full obligation at roughly 1.25x. This file clears the 1.00 starting point of many select programs with room to spare, which tends to support stronger pricing and leverage tiers.
Scenario two: borderline. Rent used for lender review covers the obligation at roughly 1.02x. It clears on paper, but a small drop in the appraiser’s figure or a bump in insurance pushes it under.
Scenario three: short. Rent used for program review covers roughly 0.92x. At that level, 1.00 is where many select programs start, so a standard program path is closed. A separate select-lender path exists below 1.00, with leverage and terms adjusted. The borrower should weigh whether reduced leverage is worth it, or whether the numbers are signaling a different property or a lower loan amount.
Notice what moved between those scenarios. In the first case, rent did most of the work. In the second and third, small changes in either rent or payment decided the outcome. A lower loan amount lowers the payment and lifts the ratio without changing the rent at all.
What Moves the Ratio Besides Rent
Rent is only the numerator. The denominator carries four levers.
- Loan size. Putting more down shrinks the payment and lifts coverage. It never erases leverage caps, credit floors, or reserve rules.
- Taxes and insurance. Both sit inside PITIA, so a high-tax county or a pricey insurance quote erodes coverage even when rent is solid.
- HOA dues. Condos and planned communities carry dues that count against you.
- Term structure. The spine is the 30-year fixed. Extended terms and interest-only periods are available through select lenders in the network, and they can change the monthly obligation the ratio is measured against.
The strongest files clear both tests: enough equity and enough rental coverage.
Leverage, Credit, and Reserves Still Apply
Projected rent only addresses the income side. The rest of the file works the usual way, subject to lender guidelines.
On a purchase, most files across the network land at 75% to 80% LTV, meaning 20% to 25% down. Select high-leverage programs reach 85% LTV on a purchase with roughly a 700-plus score. On a cash-out refinance of a standard rental, the ceiling is around 75% LTV, with about six months of seasoning as the common expectation.
Credit tiers run from a 620 floor in parts of the network, to around 660 on most programs, with 700-plus unlocking the strongest leverage. Reserves vary by lender, leverage, loan size, and transaction type, commonly around six months of PITIA, stepping up to about nine months on loans above $1,500,000. Standard programs run up to $3,000,000. Property type matters too: manufactured homes, log homes, and barndominiums are not offered in these programs.
Short-Term Rentals Are a Different Conversation
Do not assume a nightly rate works as market rent. Fannie Mae’s Appraiser Update addresses short-term rentals and Form 1007 and treats the form as calling for monthly-lease market rent, so a nightly rate multiplied out is not a valid 1007 figure.
STR programs therefore use their own methods, usually a projection from a data platform or trailing hosting income. In the network, short-term rental purchases go up to 75% LTV, refinances around 70%, and cash-outs 70%. Expect a 640-plus score and about 12 months of hosting history. The coverage floor is 1.00 on purchases and refinances. The underwritten figure frequently lands below the investor’s best-case projection, because lenders look harder at income that swings.
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. Lendmire’s piece Can a Short-Term Rental Purchase Qualify on Projected Rent? goes deeper on that path.
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.
If the Appraised Rent Comes in Low
A low rent figure is common enough to plan for. Work the fix ladder from lightest to heaviest.
| Step | What it involves | Trade-off |
|---|---|---|
| Check for errors | Review comps, unit count, features | Costs nothing |
| Request reconsideration | Submit better comps for review | May not change the number |
| Borrow less | Lower loan amount, lower payment | More cash required |
| Renew a low lease | Reset a below-market lease first | Needs the tenant’s cooperation |
| Change structure | Different term or program | Terms shift |
| Wait or walk | Lease up, or pass on the deal | Costs time or the deal |
Switching lenders to chase a higher number is rarely a real option. A different appraisal may land elsewhere, but it costs another appraisal fee.
If you are drawn to coverage below 1.00, treat it as a deliberate structural choice and not a rescue. Sub-1.00 is available through select lenders in the network, with leverage and terms adjusted. It can be defensible when the property has a clear appreciation story. It is a poor fit when it only papers over a weak submarket choice.
Purchase, Refinance, and Vacant Properties
On a vacant purchase, the appraiser’s rent is the whole income story. The core documents are the appraisal and its rent schedule, with no signed lease needed. Occupied files add the lease, and multi-unit files add a rent roll.
Refinances run differently. Some programs accept the appraiser’s rent on a vacant, rent-ready refinance, while others want a signed lease first. In a 2-to-4 unit building, some programs substitute market rent for an empty unit and others count only leased units, and on a duplex that swing can be large.
Condition matters as well. A half-finished rehab is generally not eligible. A property that still needs real work usually needs short-term bridge financing first, followed by a refinance once it is stabilized and rent-ready.
Check Your Own Number Before You Go Under Contract
Build a conservative estimate before you apply. Pull recent leased comps of the same unit count and similar condition, not asking prices. Haircut the result for any feature your property lacks. Then run it against the full PITIA, including taxes, insurance, and HOA dues.
If your conservative number only clears 1.00 barely, assume the appraiser may land lower. If it clears with room, you have a file worth ordering an appraisal on. The complete DSCR loans guide walks through the rest of the qualification picture.
Common Mistakes
- Treating a listing-site estimate as rent used for eligibility review. The figure has to come from the appraiser.
- Ignoring the lower-of rule. A high lease does not carry the file.
- Assuming one appraisal is certain. Rent is an opinion, and comps can be thin.
- Confusing coverage with profit. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it, so clearing 1.00 does not mean positive cash flow.
- Skipping the leverage test. Strong rent will not fix a credit score or reserve gap.
Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Can a vacant property qualify without a lease?
Yes, on most purchases, provided the property is rent-ready. The appraiser’s market rent opinion stands in for the lease and becomes the income figure in the ratio. Properties needing significant work generally need bridge financing first.
Can I use my own rent estimate?
No. The qualifying figure comes from the appraiser’s rent schedule, which the appraiser completes. Your estimate is useful for deciding whether to pursue the deal, but it does not enter the calculation.
What if I have a lease for more than the appraiser’s rent?
Most programs use the lower of the lease and the appraised market rent, so the higher lease does not raise your coverage. A below-market lease can pull the ratio down even when the appraiser sees upside.
Does coverage above 1.00 mean the property cash flows?
Not necessarily. The ratio compares rent to PITIA only, so repairs, vacancy, management, utilities, and capex are outside it. Underwrite those separately before you buy.
Can a rental below 1.00 coverage still be financed?
Programs below 1.00 are available through select lenders in the network, with leverage and terms adjusted. Eligibility depends on credit, reserves, the property, and lender guidelines.
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. Reach the team at 828-256-2183 or request a quote. Lendmire is a mortgage broker arranging DSCR financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Programs and eligibility are subject to lender guidelines and are not a commitment to lend.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
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References
1. Freddie Mac Form 1000 / Fannie Mae Form 1007 instructions
2. Fannie Mae Appraiser Update
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Luxury Rental DSCR Loan Works in Virginia · How to Qualify for a Super Jumbo DSCR Loan in Tennessee · How to Qualify for a Portfolio DSCR Loan for Rural Cabin STR Properties
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.