The Quick Read: Usually, yes: when no lease is in place, the lender tests the loan on the appraiser’s market rent for that unit instead of counting it as zero, though the exact treatment depends on the program, whether the deal is a purchase or a refinance, and whether the unit is rent-ready. An empty unit does not end a DSCR file by itself. What matters is the rent the appraiser supports and the condition of the property.
- The appraiser sets the number. A single-family property gets a rent schedule on Form 1007. A 2-4 unit property gets Form 1025, with rent listed unit by unit.
- Occupied units typically count at the lower of the signed lease or market rent. Vacant units count at market rent.
- Rent-ready vacant purchases are routine. Refinances are stricter on many programs, and a cash-out on a standard rental tops out around 75% LTV with about 6 months of seasoning.
- Clearing the coverage test does not mean the property cash flows.
Key Terms Defined
You will see these words on every DSCR file. Here they are in plain English.
- DSCR (debt service coverage ratio): The property’s monthly rent divided by its full monthly housing obligation. A ratio of 1.00 means the rent equals the obligation.
- PITIA: Principal, interest, taxes, insurance, and any HOA dues. It is the payment side of the ratio.
- Market rent: What an appraiser concludes the unit would rent for today, based on nearby comparable rentals.
- Form 1007 and Form 1025: The appraisal forms that document market rent. Form 1007 covers one unit. Form 1025 covers 2-4 units.
- Lower-of rule: On a leased unit, the lender generally counts the lesser of the signed lease or the appraised market rent.
- LTV (loan-to-value): The loan balance as a percentage of the property’s appraised value.
- Seasoning: How long you have owned the property before a lender will refinance it on its current value.
- Rent-ready: Livable and marketable today, with working systems and no major rehab pending.
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.
How Does a Lender Get a Rent Number for an Empty Unit?
The lender orders its own appraisal, and the appraiser answers two questions at once. One is value, which drives LTV. The other is market rent, which drives coverage. Your pro forma, your listing price, and your contractor’s after-repair projection are planning numbers. They are not the number the file is tested on.
The appraiser picks nearby rentals that resemble the subject. Then the appraiser adjusts them for size, bedroom count, condition, and amenities. The result is one monthly figure per unit. Which document carries it depends on the situation.
| Situation | Rent source | Document |
|---|---|---|
| Vacant single-family home | Appraiser’s market rent | Form 1007 |
| Vacant 2-4 unit building | Appraiser’s rent, per unit | Form 1025 |
| Leased unit | Lower of lease or market | Lease plus appraisal |
| Unit with undocumented rent | Treated as vacant | Appraisal |
| Short-term rental | Separate STR support | Varies by program |
Treating undocumented rent as vacant surprises people. If a landlord says a tenant pays cash and no lease or payment record backs it up, the lender generally falls back to the appraiser’s market rent. The same happens with a Section 8 unit when the voucher is still pending.
How Is a Vacant Unit Counted Next to Leased Units?
It depends on the building’s mix of occupied and empty units. Three scenarios cover nearly every file.
| Scenario | How income is counted |
|---|---|
| All units leased | Each unit at lower of lease or market |
| Partly vacant | Leased units as above, empty units at market |
| All units vacant | Every unit at appraiser’s market rent |
The partly vacant building is the most common case. One empty unit with the others leased is often workable. Programs differ on the details. Some count the empty unit at full market rent. Others discount it or trim leverage. A few look hard at why the unit is empty.
Fully vacant buildings can be easier than they sound. There is no lease to compare against, so the appraiser’s schedule carries the whole income side. The trade-off is that lenders look harder at condition, because an empty building is often an unfinished one.
On a pooled or blanket loan, coverage is generally tested on the combined pool. Stronger rentals can offset a vacant house. Each property still gets its own appraisal and rent opinion.
If you plan to live in one unit of a 2-4 unit building, the rules change entirely. Lendmire’s explainer Does a Jumbo Loan Count Rent on a 2-4 Unit Home You Live In? covers that separate case. DSCR loans are designed for non-owner-occupied investment properties.
Worked Example: A Fourplex With One Empty Unit
Run the numbers on a modeled fourplex. These ratios are assumptions for illustration, not market data. Say the building clears 1.20x when all four units count at appraised market rent.
| Treatment of the empty unit | Modeled coverage |
|---|---|
| Counted at full market rent | About 1.20x |
| Counted at a discount | Roughly 1.10x to 1.15x |
| Left out entirely | About 0.90x |
The math is simple. Three of four units equal 75% of the rent. Multiply 1.20x by 0.75 and you get 0.90x. Same building, same payment, three different answers.
Now picture the low-appraisal problem. Say a lease would support about 1.25x, but the appraiser’s market rent comes in about 12% below that lease. The ratio drops toward 1.10x. That is still a usable number. Push the gap wider and you cross a program’s floor.
About that floor: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Eligibility depends on lender guidelines, your credit profile, reserves, and property review.
Where the Rent Form Comes From (and Where It Stops)
No government agency owns DSCR underwriting. Each lender and program sets its own rules. The forms are the one piece that comes from the conventional world.
Form 1007 is the single-family comparable rent schedule, a joint Freddie Mac and Fannie Mae form. According to Freddie Mac’s Form 1000 and Fannie Mae Form 1007, it gives the appraiser a standard format with a comparable grid, an indicated monthly market rent line, and room to comment on rent ranges, vacancy, and trends. Fannie Mae’s appraiser update confirms the form documents estimated monthly market rent on one-unit investment properties and condos.
The same update draws one hard line. Form 1007 cannot be used for short-term rental rates. It measures monthly rent, not a nightly rate. For a short-term rental, programs look at other support. Many want hosting history and a separate income analysis. Multiplying a nightly rate by 30 days is not valid support. 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.
Notice what the forms do not do. They do not set a coverage floor, a leverage cap, or a vacancy discount. Those come from the program.
Why Do Lenders Treat Vacancy Differently?
Across the wholesale network of DSCR lenders Lendmire works with, most programs credit an empty unit at the appraiser’s market rent. A few lenders in the network discount it. Some trim leverage on vacant units instead. The strictest want a lease before they will refinance.
Why the spread? Each lender is pricing its own risk. A vacant unit is a unit that has not yet proven a tenant will pay. Some lenders accept the appraiser’s word. Others want proof.
Before you pick a program, ask these questions:
1. Does the program count an empty unit at full market rent, at a discount, or not at all?
2. Is there a cap on vacant units at closing?
3. Does leverage drop when the property is vacant?
4. Is a lease required after closing?
5. Does the answer change for a refinance?
The strongest files clear two tests: enough equity and enough rental coverage. A bigger down payment lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. For the broader mechanics, see the complete DSCR loans guide.
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.
Purchase vs. Refinance: Where Vacancy Gets Stricter
This is the biggest split. On a purchase, a rent-ready vacant property is routine. Most files land at 75%-80% LTV on an investment-property purchase, subject to lender guidelines. The appraiser’s rent carries the income side, and no tenant needs to be in place.
Refinances are different. Many programs want a lease or an operating history before they will refinance. A cash-out on a standard rental tops out around 75% LTV across most of the network. About 6 months of seasoning is the common expectation. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
That matters for BRRRR investors, who buy, rehab, rent, and refinance. Line up a lease, or confirm that the program accepts a vacant, rent-ready property, before you pick your take-out. Do not assume your after-repair value will count. The lender uses its own appraisal.
Credit and reserves apply either way. A 620 floor exists in parts of the network. Most programs want around 660, and 700 or higher opens the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Reserves vary by lender, leverage, and loan size, so read them as typical, not universal.
What Can Go Wrong
A low appraisal. One comp grid sets your rent. A low opinion shrinks the numerator and can drop coverage below a program’s floor. It can also reduce loan size or leverage. You cannot argue the appraiser up with your own pro forma. Better evidence, such as nearby comparable rentals with a similar condition, may support a review. The result is not guaranteed.
Condition. A light cosmetic vacancy typically flows through. A unit that needs real work is a different story. Utilities usually need to be on so the appraiser can confirm the systems work. Heavier rehab is often handled by waiting, or by using a short-term bridge loan first.
A discounted lease signed to fill a unit. The lower-of rule cuts both ways. A below-market lease signed just to fill a unit can lower your counted rent. Renewing a below-market tenant at market before the appraisal can lift it. Think through the lease before the appraiser visits.
An above-market lease. It does not help. The lower-of rule means the appraised market rent caps the count.
Lease-up and build-to-rent houses. These are usually fine on market rent. Some lenders add a leasing condition before or after closing.
Confusing coverage with cash flow. Clearing 1.00 is not positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside the calculation. A vacant building can pass the test and still lose money every month. That is also the difference from a commercial coverage ratio, which typically deducts operating expenses first.
Documents to Have Ready
For a vacant property, the core deliverable is the appraisal with the rent schedule. Beyond that, a few items help the file:
- A current rent roll for any leased units, with signed leases.
- Listing history or marketing activity for empty units.
- Nearby rental comps you have collected, as planning support.
- Proof that utilities are on and systems work.
- Payment records for any rent you want counted that has no lease behind it.
Frequently Asked Questions
Is a vacant unit counted at zero?
Usually not. Most programs count it at the appraiser’s market rent. A few discount it or trim leverage instead. The treatment depends on the program, so confirm before you apply.
Can I use my own projected rent instead?
No. The lender orders its own appraisal, and the appraiser’s figure is the one that counts. Your projection is a planning number you can use to stress-test the deal before you apply.
Does a fully vacant building qualify?
Often yes, if it is rent-ready and the appraiser’s schedule supports coverage that clears the program’s floor. Condition is the usual sticking point. A building that needs heavy rehab typically has to wait or use bridge financing first. Qualification stays subject to lender guidelines, credit approval, and property review.
Do 5+ unit buildings work the same way?
Not on these forms. The 1007 and 1025 cover one to four units. Larger buildings fall under different underwriting, so ask about program fit before assuming the same rules apply.
Does passing the ratio mean the deal cash flows?
No. The ratio tests rent against PITIA only. Operating costs, vacancy, and repairs are not in it. Stress-test those separately before you buy.
Next Step
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 mortgage broker that arranges these loans through select lenders in its wholesale network, across 41 markets including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
Vacancy is the part of a rental file you can plan around, because the lender cares less about the empty unit than about whether the appraiser’s rent clears the number.
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
2. Fannie Mae appraiser update on Form 1007
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 DSCR Lender Tests a Family Lease Against Market Rent · How to Shop and Document Rental Insurance Before a DSCR Loan · Can You Get a DSCR Loan After a Short Sale or a Lost Rental?
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.