The Quick Read: Most DSCR programs count the lower of the signed lease rent and the appraiser’s market rent. That is a lender convention, not a law, and details vary by program. A lease is the right evidence on an occupied property. The appraiser’s number stands alone on a vacant one.
- On most files, an above-market lease adds nothing to the coverage ratio.
- A below-market lease can pull the ratio down, even when the market would pay more.
- A vacant purchase is usually qualified on the appraiser’s market rent alone.
- Short-term rentals follow a different documentation path.
- Clearing 1.00 is not the same as positive cash flow.
The honest answer to “which rent counts” is that the lease is evidence and the appraisal is an independent opinion. The lender reconciles the two. Investors who model on the lease alone are the ones who get surprised at underwriting.
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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.
Side-by-Side
The columns below show published industry norms for each approach. Lendmire’s wholesale network places files under both. Which one a lender applies depends on its program and the property.
| Factor | Lease Rent | Appraiser Market Rent |
|---|---|---|
| Who produces it | Landlord and tenant | Licensed appraiser |
| What it is | Contractual rent actually owed | Opinion from comparable rentals |
| Best fit | Occupied, stabilized rentals | Vacant or newly acquired units |
| Documentation | Executed lease, proof of payment | Rent schedule in the appraisal |
| 2-4 unit properties | Per-unit leases, rent roll | Operating income statement form |
| Short-term rentals | Host history, platform statements | Long-term form does not fit |
| Main risk | Above or below market | Thin or mismatched comps |
| Reserves | Same file-level test either way | Same file-level test either way |
Key Terms Defined
DSCR is the ratio of rent used for lender review to the full monthly housing payment: principal, interest, taxes, insurance, and any HOA dues (PITIA).
Market rent is an appraiser’s opinion of what the unit would rent for, built from comparable rentals.
Lease rent is the rent the tenant has contractually agreed to pay under an executed lease.
Rent schedule is the appraisal section or form that reports the market rent conclusion.
Lower-of convention is the common program practice of using the smaller of lease rent and market rent when both exist.
Where Does the Rent Number Come From?
It comes from the lender’s reconciliation of the lease and the appraisal, not from the borrower’s projection. Lenders do not accept a landlord’s hoped-for rent, because the number drives loan size. The lease and the appraisal are checks on each other.
Here is how the appraiser builds the market figure. Per the instructions on Freddie Mac Form 1000 / Fannie Mae Form 1007, the appraiser pulls comparable rentals and adjusts only for significant differences between the comps and the subject. McKissock, an appraiser-education provider, lists the inputs: location, condition, year built, property type, size, the subject’s lease, and comparable rents.
Two points on forms. The single-family rent schedule is Form 1007. These are borrowed appraisal documents. DSCR loans are not agency products, and agency selling rules do not govern them.
| Situation | Rent source on most programs | What to send |
|---|---|---|
| Leased at market | Lease and appraisal roughly agree | Lease, proof of payment |
| Leased above market | Lower figure, usually market | Lease, proof of payment |
| Leased below market | Lower figure, usually the lease | Lease, payment history |
| Vacant purchase | Appraiser’s market rent | Nothing beyond the appraisal |
| Month-to-month or expired lease | Weaker evidence; program-specific | Prior lease, payment history |
| 2-4 units, mixed occupancy | Each unit on its own basis | Leases, rent roll |
When Lease Rent Is the Better Fit
Lease rent works best when the property is occupied, the tenant pays on time, and the rent sits at or near market. On those files the lease and the appraisal agree, and the lease documents a payment history that a comp set cannot.
Lease evidence also matters on refinances. The rent schedule is used alone or with leases on a purchase, and with leases or traditional personal-income documentation on a refinance. That tracks what most programs in the network want: operating history on a refinance, not just an opinion.
Say a rental is leased at a rent that matches the appraiser’s number. The coverage ratio is the same either way, and the file is clean. The lease adds proof, not income.
The lease cannot rescue a thin file. It supports the number. It is not a separate income source. On many programs an above-market lease simply gets capped at the appraiser’s figure.
When Appraiser Market Rent Is the Better Fit
Appraiser market rent is the better fit when there is no usable lease. That means a vacant purchase, a unit being re-leased, or a tenant paying well below market.
Vacant properties are not a problem. The appraiser’s market rent stands alone, and no signed lease is required on most programs. Investors buying a vacant duplex or a renovated single-family can qualify on that opinion, subject to lender guidelines.
Below-market tenants cut the other way. Picture an investor with a long-tenured tenant paying well under market. If the program uses the lower of the two, the coverage ratio runs off the lease and drops. The fix is practical: renew at market before the refinance, if the tenant agrees.
Here is a modeled example, not market data. Hold the monthly obligation constant. If the lease rent is a notch above the appraisal, the rent used for lender review is the appraisal and the ratio lands near 1.1x. If the lease is a notch below, the ratio lands near 0.95x, and the file needs a different structure. Sub-1.00 coverage is available through select lenders in the network, with leverage and terms adjusted. Qualification stays subject to lender guidelines, credit approval, and property review.
What If the Appraisal Rent Comes In Low?
A low rent schedule is fixable when the cause is an error or a weak comp set. It is not fixable by pointing at the lease alone, because a lease is not independent market evidence.
1. Check for factual errors. Unit count, bedroom count, square footage, and condition notes all feed the comps.
2. Gather specific comparable rentals. Recent, nearby, similar-size units with signed leases carry the most weight.
3. Request reconsideration through the lender. Submit the comps and the factual corrections in one packet.
4. Reset the structure if the number holds. Lower leverage, a larger down payment, or a different program may bring the ratio back above 1.00.
A larger down payment lowers the payment and can lift the ratio. It never removes leverage caps, credit floors, reserve rules, or property eligibility. Strong files clear both tests: enough equity and enough rental coverage.
Timing and Tenancy Edge Cases
Most of the friction on rent files comes from tenancy details, not the formula.
New lease before applying. A freshly signed lease needs the deposit and first month’s rent documented. Without payment proof, many programs lean harder on the appraiser’s number.
Month-to-month or expired lease. These are weaker evidence. Programs vary, and the appraisal often carries the file.
Family or related-party tenants. Expect closer scrutiny and more payment documentation. Programs treat these case by case.
Rent credits, concessions, or option fees. Concessions in the lease can reduce what counts. Keep the terms clean and written.
Non-paying tenants. A lease with no payment history is a document, not evidence of income.
Section 8 and regulated units. These are reviewed case by case, and the rent that counts is the regulated or contract amount.
2-4 units. Each unit gets its own basis. Occupied units run on leases, vacant units on market rent, and the lender combines them.
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.
Where the General Rule Breaks: Short-Term Rentals
Short-term rentals do not fit the long-term rent schedule. Fannie Mae’s June 2024 appraiser update says Form 1007 calls for indicated monthly market rent, so comps must be monthly leases, and multiplying a nightly fee by 30 is incorrect. Appraisal firms say the same about using the form for short-term rentals, as Class Valuation explains.
Across the wholesale network, short-term rental files run on their own documentation: hosting history, platform statements, and projection reports. Typical guidance is a 640+ score and about 12 months of hosting history. Purchases go to 75% LTV, and refinances to around 70%. Cash-out on short-term-rental collateral tops out at 70%, while a standard rental cash-out tops out at 75%. Coverage floors are 1.00 on both purchases and refinances. 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. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Common Mistakes and Myths
“My lease is the rent that counts.” On many programs the lower of the lease and market rent counts. It is convention, not law.
“The appraiser approves my lease.” The appraiser forms an independent opinion. The lender decides how to use it. McKissock states that lenders make the ultimate decision on income.
“Form 1007 captures Airbnb income.” It does not.
“DSCR loans follow agency rules.” Only the form names and the comp method are borrowed.
“Clearing 1.00 means positive cash flow.” The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it.
Other modeling errors: leaving taxes, insurance, or HOA out of the payment, and mixing monthly and annual figures.
What the Network Looks Like on Leverage and Credit
Program figures vary by lender and file. Typical ranges across Lendmire’s wholesale network, subject to lender guidelines:
- 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.
- Purchase leverage typically lands at 75%-80% LTV on an investment property. Cash-out tops out around 75%.
- Credit tiers run 620, 660, 680, and 700, with a 620 floor in parts of the network.
- Reserves are commonly about 6 months of PITIA, stepping up to about 9 months above $1,500,000.
- Standard programs run up to $3,000,000, and smaller balances route through select lenders.
Manufactured homes, log homes, and barndominiums are not offered in these programs. The complete DSCR loans guide covers the full qualification picture. For the lease-versus-schedule question in a specific scenario, see Lendmire’s piece Lease Rent vs 1007 Market Rent: Which Figure a DSCR Lender Uses.
The Verdict
Neither figure wins on every file. Lease rent proves an occupied property pays. Market rent protects the lender from inflated or stale leases and carries vacant purchases. Most programs take the lower of the two when both exist, with exceptions by lender.
Model on market rent, keep the lease and payment proof clean, and expect the appraisal to set the ceiling. 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.
Frequently Asked Questions
Do DSCR lenders use the lease or the appraiser’s rent?
Most programs use the lower of the two when both exist. The convention is set by lenders, not regulators, so programs vary. A vacant property runs on the appraiser’s market rent alone.
Does an above-market lease raise my DSCR?
Usually not. Under a lower-of approach, the rent used for lender review is capped at the market figure. A below-market lease, by contrast, can lower the ratio.
Do I need a signed lease to buy a vacant rental?
Generally no. The appraiser’s market rent can carry a vacant purchase on most programs, subject to lender guidelines and property review.
Can I use my own projected rent?
No. Lenders rely on the lease and the appraisal because the rent figure drives loan size. A projection is not evidence.
What if the appraisal rent is too low?
Check the report for factual errors, then submit specific comparable rentals through the lender for reconsideration. If the number holds, lower leverage or a larger down payment may restore coverage.
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. McKissock: Form 1007 and Short-Term Rental Appraisals
3. Fannie Mae Appraiser Update, June 2024
4. Class Valuation: Why Form 1007 Can’t Be Used for Short-Term Rentals
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Renegotiate vs Reconsideration When a DSCR Loan Comes in Short · Renting to a Parent vs. a Stranger on a DSCR Loan · No-Reserves DSCR Loan vs Standard DSCR Loan on Pricing and LTV
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.