The Quick Read: A refinance on a tenant payment plan suits an owner whose tenant is still in the unit and paying, while a refinance after eviction suits an owner who has regained possession and can show the unit is ready to rent. In both cases the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. What differs is the rent evidence the lender can count.
- A payment-plan file leans on the lease plus proof that rent is actually being paid.
- A post-eviction file usually runs on the appraiser’s market rent, because no lease exists yet.
- DSCR compares rent to the full monthly obligation only. It does not measure cash flow.
- Lender policy on arrears, open court cases, and vacant refinances varies, so tell the broker which situation applies before the appraisal is ordered.
The Honest Answer: Who Each Path Is For
Neither path is better in the abstract. The payment-plan path is for the owner who kept the tenant, has a written cure agreement, and can show deposits arriving on schedule. The after-eviction path is for the owner who finished the court process, has the keys back, and is willing to present a clean, rent-ready unit.
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The payment plan keeps a rent stream on paper but puts the tenant’s reliability on trial. The post-eviction file removes the reliability question but adds vacancy, turnover cost, and a lender who may ask harder questions about a vacant refinance.
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. For the full picture of how the product works, see Lendmire’s complete DSCR loans guide.
Side-by-Side
The column details below reflect how files in this wholesale network typically read. Guidelines differ by lender, so treat each cell as a typical pattern, not a promise.
| Factor | Tenant on a Payment Plan | After Eviction |
|---|---|---|
| Rent used for review | In-place lease, backed by payment proof | Appraiser’s market rent |
| Key documents | Lease, rent ledger, bank deposits, signed plan | Court judgment, possession record, turnover records |
| Appraisal rent form | Rent schedule ordered with the appraisal | Rent schedule ordered with the appraisal |
| Main risk | Late or missed plan payments weaken proof | Vacancy and condition questions |
| Entity vesting | LLC title is possible, subject to program terms | LLC title is possible, subject to program terms |
| Property types | Standard eligible rentals only | Standard eligible rentals only |
| Timeline | Tied to the plan’s schedule | Tied to turnover and re-leasing |
| Reserve expectations | Commonly around 6 months PITIA | Commonly around 6 months PITIA |
Both columns assume the property is an eligible type. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, whatever the tenant situation.
How a Lender Decides Which Rent Counts
A DSCR file counts one of two rents: the in-place lease, or the appraiser’s market rent. When a tenant is in possession, the lease applies. When the unit is vacant, the appraisal’s market-rent opinion stands in for it.
The appraiser documents market rent on a comparable rent schedule. Fannie Mae’s Selling Guide names the Single-Family Comparable Rent Schedule (Form 1007) as the exhibit for one-unit investment properties. The 2-4 unit counterpart is Form 1025. DSCR loans are not agency products, and those forms are borrowed only for the appraisal step.
Many files count the lower of the lease rent and market rent. A lease above market does not lift the number. A lease below market holds it down. That habit is a practitioner convention, not a regulation, and individual lenders can differ.
The coverage formula itself is simple. Rent is divided by the full monthly obligation: principal, interest, taxes, insurance, and any HOA dues. Many select programs across the network start at 1.00, where rent equals the obligation. That is a floor for specific programs, not the standard. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
Refinancing While the Tenant Is on a Payment Plan
The tenant stays in possession and the lease stays in force. A payment plan is a negotiated cure of arrears, not a new lease. Mass.gov’s tenant guide notes that on a rent-based notice to quit, a tenant can work out a payment plan and may prevent an eviction by paying the arrears by a specified date.
Arrears versus base rent. Catch-up installments are not the same as the rent the property earns. A file that counts the catch-up amount as rent overstates coverage. The cleaner approach is to qualify on the lease rent or market rent, whichever is lower, and treat the arrears schedule as a separate record.
Written agreements matter. State legal-aid sources say settlements should be in writing. Arizona Eviction Help advises that any agreement be written, signed, and dated by both sides, and notes that a court may sign a stipulated judgment after the tenant signs. A lender may read a court-stipulated plan differently from an informal one. Expect questions either way.
Proof of payment carries the file. The agreement alone proves nothing about collection. Underwriters look for the ledger and the bank trail. A string of on-time installments plus on-time current rent reads very differently from a plan that was signed last week.
The documents that usually matter:
1. The executed lease and any amendments.
2. A rent ledger showing current rent and arrears separately.
3. Bank deposits matching the ledger.
4. The signed payment-plan or settlement agreement, plus any court stipulation.
5. The mortgage statement, insurance declarations, and tax bill.
6. Entity documents, if an LLC holds title, subject to lender program eligibility.
What decides the outcome. Three things: whether rent is actually being paid, whether the lease or market rent is lower, and whether any open court case or lien sits on the property. An open case can touch title and the lender’s view of who holds possession. The tenant situation is not the only thing that can stop a file. A derogatory record on a borrower’s other property can sink a refinance even when coverage looks fine.
Refinancing After Eviction Is Complete
An eviction typically moves through notice, filing, hearing, judgment, and a writ or warrant of possession. WebJunction’s overview of the phases notes that timing varies by state and circumstance. Only a court order can force a tenant to move out. Rules are state-specific, so the owner should work through local counsel for the process itself.
After possession, the unit is vacant and no lease exists. The file runs on the appraiser’s market rent. A vacant refinance is where lender policies diverge, so describe the situation plainly up front and let the broker route the file to a program that reviews it.
Condition and re-leasing carry more weight here. Many lenders prefer a rent-ready unit. A new lease with a deposit and first-month payment can strengthen the file, though it is not always required. Signing a new lease is the closing step of the typical process, as Apartments.com’s eviction walkthrough lays out.
The documents that usually matter:
1. The court judgment and possession record.
2. The appraisal with the market-rent schedule.
3. Repair and turnover records showing the unit is ready.
4. A new lease, if re-leased.
5. The same property, insurance, and entity documents as above.
A short explanation letter helps. It should say why the unit is vacant, what was repaired, and what the leasing plan is. Keep it factual and consistent with the court record.
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.
Edge Cases That Change the Answer
Eviction pending, tenant still in the unit. This is neither a clean plan nor a finished eviction. A tenant can often cure until judgment or possession, so the file has an open dispute. Lender policy on active litigation varies, and many owners find the cleanest path is to resolve the case first.
Partial payments can reset the process. Accepting full or partial payment after a pay-or-quit notice can stop an eviction, and the landlord may have to start over, as Apartments.com’s eviction walkthrough explains. Whether a landlord may accept rent mid-case is state-specific. Structure any payment plan with counsel before the lender ever sees it.
Multi-unit buildings. On 2-4 unit properties, rent is built unit by unit. Occupied units are supported by leases and vacant units by market rent. A clean rent roll reconciles the two. One unit under a payment plan and one vacated after eviction can sit in the same file.
Short-term rentals. The rent schedule form does not fit nightly income. Per Fannie Mae’s June 2024 Appraiser Update, Form 1007 cannot be used to estimate the nightly fee for a short-term rental. STR files follow their own path: purchases to 75% LTV, refinances around 70%, and cash-out at 70%, with a 640+ score and about 12 months of hosting history. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Blanket or portfolio loans. One troubled house can drag blended coverage on a pooled loan. Keep the problem unit’s story separate and documented.
When a Payment-Plan Refinance Is the Better Fit
Choose this path when these things line up:
- The tenant is current on ongoing rent and on plan installments, with months of clean deposits to show it.
- The lease rent is at or below market, so the lower-of test does not cut coverage.
- No court case is open, or any stipulation is resolved and documented.
- The owner wants to avoid vacancy, turnover cost, and a re-leasing gap.
- The coverage ratio clears on the lower rent without counting any arrears recovery.
The trade-off is dependence on the tenant. A missed installment late in the file can undo weeks of paperwork. If the plan is brand new, letting it season before the application usually produces a stronger record.
When Refinancing After Eviction Is the Better Fit
- Possession is fully recovered and the court record is clean and available.
- The unit is rent-ready, or a re-lease with deposit and first-month payment is in hand.
- Market rent from the appraisal supports the coverage ratio on its own.
- The owner prefers a clean tenant slate over a payment history that may be thin.
The trade-off is cost and carry. Turnover, vacancy, and repairs sit outside the DSCR calculation but hit the owner’s pocket directly. Lender treatment of a vacant refinance also varies, so the program choice matters.
What the DSCR Number Does Not Tell You
Clearing 1.00 is not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it. A refinance can pass coverage while the property struggles.
On a cash-out, the rent is tested against the new, larger obligation, not the old one. Cash-out tops out around 75% LTV on standard rentals across most of the network, with about 6 months of seasoning as the common expectation. Rate-and-term refinances can go higher, up to 85%, subject to lender guidelines.
A larger equity cushion can lower the obligation and lift the ratio. It never erases credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Typical credit expectations run from a 620 floor in parts of the network to around 660 for most programs, with 700+ opening the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, with some conservative files seeing them waived and loans above $1,500,000 stepping up to about 9 months. Standard programs go up to $3,000,000. All of this is subject to lender guidelines, credit review, and property review.
Frequently Asked Questions
Can a DSCR refinance close while a tenant is behind on rent?
It depends on the lender and the evidence. A signed plan with a record of on-time payments gives the file something to rely on. A plan with no payment history, or one in default, gives underwriters little to count. Tell the broker the full situation before the appraisal.
Does an eviction on the property disqualify a refinance?
There is no blanket rule, and treatment depends on lender policy. The nature of the issue matters: open litigation, title questions, and property condition get more attention than a closed, documented case. No single waiting period applies across the board.
Do I need a signed lease to refinance after eviction?
Not necessarily. When the property is vacant, the appraiser’s market rent stands in for a lease, and the borrower does not choose that figure. A new lease with a deposit and first rent payment can strengthen the file.
Is the lease rent or the market rent used?
Many files use the lower of the two. A lease above market does not raise the counted rent. Your broker can confirm how the chosen program treats it.
Do arrears count as rental income?
No. Catch-up installments are not ongoing rent. Qualify on the base rent, keep the arrears schedule documented separately, and keep the ledger consistent with bank deposits.
Balanced Verdict
If the tenant is paying, the plan is written, and the deposits show it, the payment-plan refinance keeps the unit occupied and avoids turnover. If the plan is shaky or a case is open, finishing the process and re-leasing first usually produces a cleaner file. The deciding variable is evidence of real, on-time payment, not the story behind it. Eviction and settlement rules are state-specific, so confirm the legal side with a local attorney.
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 at Lendmire’s quote page. Tax treatment varies; consult a qualified professional.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. Fannie Mae Selling Guide B4-1.2-01
2. Mass.gov, Tenants’ guide to eviction
4. WebJunction, Five Phases of Eviction
5. Apartments.com, 10 Steps in the Eviction Process
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 Time a DSCR Refinance Around a Five-Year Step-Down · How to Fund a 2-4 Unit Remodel With a HELOC Then Refinance to DSCR · Can You Get a Cash-Out Refinance While a Tenant Owes Rent?
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.