The Quick Read: Usually no on a purchase: when the property is vacant and rent-ready, the appraiser’s market-rent opinion stands in for the lease, while a refinance more often expects a tenant or an operating history. A signed lease is the normal proof of rent when a tenant is already in place, but it is not a universal condition of closing.
- On a vacant purchase, the appraisal’s rent schedule sets the rent used for lender review.
- When a lease exists, many programs underwrite the lower of lease rent and market rent.
- Refinances and cash-outs generally want the property leased or showing an operating history.
- Credit, reserves, down payment and entity documents are still required either way.
- Clearing the coverage test is not the same as positive cash flow.
Most of the confusion comes from mixing up two transaction types. Buying a vacant rental and refinancing one you already own are different files, and the lease question has different answers for each. The rest of this piece sorts out which rule applies to which file.
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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 Short Answer, by Scenario
Whether a lease is required depends on the transaction, occupancy and rent type. Across the wholesale network of DSCR lenders that Lendmire works with, programs differ on the details, so treat this table as the common pattern, not a promise.
| Scenario | Lease required? | What substitutes | What to watch |
|---|---|---|---|
| Vacant purchase | Usually no | Appraiser market rent | Property must be rent-ready |
| Purchase with tenant in place | Usually yes | Executed lease | Lower-of rule may apply |
| Vacant refinance | Often yes | Market rent on some programs | Leverage may be reduced |
| Leased refinance | Yes | Executed lease | Rent proof may be requested |
| Short-term rental | No lease | Hosting history or platform data | History expectations apply |
| Partly vacant 2-4 units | Varies | Market rent for vacant unit | Treatment differs by lender |
How the Appraiser’s Rent Opinion Replaces a Lease
On a vacant purchase, the lender orders a full appraisal that includes a rent schedule, and the appraiser’s monthly market-rent figure becomes the rent used for lender review. No tenant is needed to produce it.
For a one-unit investment property, the appraiser documents market rent on a comparable rent schedule. That form is numbered 1007 at Fannie Mae and 1000 at Freddie Mac. Freddie Mac’s form page describes it as a way for appraisers to estimate a property’s market rent, prepared as an attachment to the appraisal of a single-family investment property. Two to four unit properties use a different appraisal report form, numbered 1025.
One point of clarity. DSCR loans are not agency products. Fannie Mae’s Selling Guide requires the rent schedule on conventional loans only when the property is a one-unit investment property and rental income is used to qualify. DSCR programs borrow the form names and set their own rules. That is why the lease answer lives in the program guidelines, not in any agency manual.
The appraiser picks comparable rentals, adjusts for size, condition, bedrooms and location, and reconciles to one number. It is an opinion based on comps. It can land below what you hoped, and it is not a promise.
The File Sequence: Where a Lease Actually Matters
A lease matters at the point the lender sets the rent used for lender review, not at the closing table. Here is how a typical file moves.
1. Application. The borrower states whether the property is vacant or occupied, and whether it is a purchase or refinance. That one answer routes the file.
2. Appraisal order. The rent schedule is ordered with the appraisal. Vacant or leased, the appraiser still produces a market-rent opinion.
3. Lease submission, if a tenant exists. The executed lease goes in the file: signed by both parties, with rent, term and parties stated. Many programs then compare lease rent to market rent and use the lower.
4. Ratio. Rent is divided by the full monthly obligation: principal, interest, taxes, insurance and any HOA dues. A result above 1.00 means rent covers that obligation. Select programs start at 1.00, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted.
5. Clear to close. Credit, reserves, entity documents and title items are reconciled. A missing lease on an occupied property is a common reason a file sits in review.
One edge case: a lease signed after the appraisal but before closing. Programs differ on whether they re-compare rent. Ask the loan officer before signing, not after.
When a Lease Exists: The Lower-Of Rule
Where a tenant is in place, many programs size the loan on the lower of the lease rent and the appraiser’s market rent. An above-market lease does not lift the number. A below-market lease generally pulls it down.
Run it as a ratio. Say a lease sits well above the appraiser’s rent. The market figure controls, and coverage is calculated on that. Now flip it: a long-held friendly lease sits below market. The lease controls, and coverage drops against the same payment.
| Case | Rent used for review | Effect on coverage |
|---|---|---|
| Vacant | Market rent only | Set by appraisal |
| Lease at market | Lease and market agree | Neutral |
| Lease above market | Market rent (capped) | No lift |
| Lease below market | Lease rent | Lowers coverage |
These are modeled relationships, not market data. Where a program allows it, the fix for a below-market lease is renewing at a supportable market rent before the file goes in. Lendmire’s piece How to Reset a Below-Market Lease Before a Super Jumbo DSCR Refinance walks through that sequence.
Purchase Versus Refinance: Why the Rules Differ
Purchases of rent-ready vacant property are routine because the buyer is acquiring the asset and the lender relies on the appraisal. A refinance is a different risk: the property already exists as an operating asset, so lenders generally want to see it operating.
That means a leased property or, for a short-term rental, a hosting history. Some programs use market rent alone on a vacant refinance. Others discount the rent or cut leverage for vacancy. It varies by program, and this is where files get surprised.
On leverage, most purchase files in the network land at 75%-80% LTV, and a cash-out refinance on a standard rental tops out around 75% LTV. A vacant refinance can sit below those ceilings depending on the program. The practical move: if a refinance or cash-out is coming, lease the property up first and avoid the vacancy adjustment altogether. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
Condition matters too. “Rent-ready” means a tenant could move in. A half-finished rehab is not rent-ready, and a vacant purchase in that state is a poor fit for a standard DSCR program.
Short-Term Rentals, Multifamily and Lease Structure
A short-term rental has no long-term lease to sign, so the lease question changes shape. The rent schedule is built on monthly-lease comparables, and Fannie Mae has issued an appraiser update on short-term rentals and the rent schedule addressing that topic. Short-term income is generally documented through platform data or market-data reports instead. On network programs, expect a 640+ score and about 12 months of hosting history. Purchases go to 75% LTV with a 1.00 coverage floor, refinances run around 70% with the same 1.00 floor, and a short-term-rental cash-out is capped at 70%. 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.
Small multifamily is where lenders disagree most. Some allow one or two rent-ready vacant units on a refinance. Treatment of the vacant unit differs: some count it at zero, others at the appraiser’s market rent. Do not assume either. This is program-specific.
Lease structure also matters. Most programs do not accept lease options inside the lease. Some allow a purchase option that cannot be exercised for more than a year. Many prefer one lease per property or unit, though a few programs allow rent by the room. For rent-controlled or stabilized units, the registered legal rent generally controls.
Should You Sign a Lease Before Closing Anyway?
Only if it helps the file, and sometimes it does not. A signed lease on a vacant purchase is optional, and it can cut both ways.
| Factor | Signing before closing | Waiting |
|---|---|---|
| File clarity | Cleaner rent evidence | Relies on appraisal alone |
| Rent level | Lower-of rule may apply | Market rent sets the number |
| Flexibility | Locks the tenant and term | Free to price after closing |
| Risk | Below-market lease hurts coverage | Lease-up gap after closing |
If the lease rent beats the appraisal, it gains nothing. If it falls short, it costs coverage. A lease only earns its keep when the property is occupied at closing and the program requires it, or when a refinance is next and you want a seasoned rental history.
Some programs also add a post-closing leasing expectation on vacant purchases. Ask before choosing a program, since this is a lender-level condition and not an industry-wide rule.
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 a Lender-Ready Lease Looks Like
When a lease is required, it needs to be clean. The usual checklist:
- Signed by both landlord and tenant.
- Rent amount, term and start date stated.
- Tenant named, and not a related party where the program restricts it.
- Current, not expired, unless the program accepts month-to-month terms.
- Rent proof on request, such as deposit records or bank deposits.
Inherited tenants on a purchase add a step. The seller’s lease is typically assigned, and the lender may want the lease and proof of the rent actually being paid. Backdated or inflated leases are a real problem: lenders verify leases against the appraisal and deposits, and staged paperwork sinks a file.
If There Is No Lease and the Rent Number Comes In Low
A low rent opinion is fixable only with evidence. Documented errors in the appraisal and closer comparable rentals can support a reconsideration request. A “needed” rent or a high listing price does not.
Better to prevent it. Before making an offer, run the deal on a conservative market rent, not the top listing in the neighborhood. Lendmire’s guidance on stabilizing coverage before closing covers how to build that cushion into the numbers.
Remember what the ratio measures. It compares rent to the payment only. Repairs, vacancy, management, utilities and capex sit outside it, so clearing 1.00 does not mean the property cash-flows. Stress-test those costs separately.
Key Terms Defined
Market rent: the monthly rent the appraiser estimates for the property based on comparable rentals.
Rent schedule: the appraisal exhibit where that market-rent opinion is documented.
Lower-of rule: a common program treatment that uses the smaller of lease rent and market rent.
Rent-ready: a property in condition for a tenant to move in with no rehab.
Coverage ratio: monthly rent divided by the full monthly housing obligation.
Operating history: a record of actual rental income, such as hosting history on a short-term rental.
Ask Your Lender in Writing
Programs differ, so get answers before the contract deadline, not after.
- Is a lease required on this transaction type?
- Is rent based on the lower of lease and market, or market alone?
- How is a vacant unit in a 2-4 unit property treated?
- Is there a post-closing leasing expectation?
- What are the reserve and leverage terms if the property is vacant?
Reserves 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. A vacant property is exactly where a lender wants to see you can carry the payment. Credit, down payment and entity documents apply on a vacant purchase just as on any other. Most programs want a score around 660, with a 620 floor in parts of the network and 700+ for the strongest leverage tiers. Details are in the complete DSCR loans guide, and all of it is subject to lender guidelines and individual underwriting.
Frequently Asked Questions
Do I need a signed lease before closing on a vacant rental purchase?
Usually not. On a rent-ready vacant purchase, the appraiser’s market-rent opinion supplies the rent used for eligibility review. Credit, reserves, down payment and entity documents are still required.
Does a lease above market rent raise my coverage ratio?
On many programs, no. The extra rent is capped at the appraiser’s market figure, so the ratio is calculated on the lower number.
What if my existing lease is below market?
The lease generally controls, which can lower coverage. Where the program allows it, renewing at a supportable market rent before the file goes in can fix that.
Can I refinance a vacant property?
Sometimes. Most refinances expect the property to be leased or to show an operating history. A few programs use market rent alone, and others reduce leverage or discount the rent for vacancy.
Does clearing 1.00 mean the property cash-flows?
No. The ratio compares rent to the monthly obligation only. Repairs, vacancy, management, utilities and capex are outside the calculation.
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. Tax treatment varies; consult a qualified professional.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 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
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 Whitefish · Super Jumbo DSCR vs Commercial Loan on a Luxury Duplex · How to Qualify for a Super Jumbo DSCR Loan in Washington
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.