The Quick Read: A low 1007 means the appraiser’s market-rent opinion came in under what you expected, and that number caps your coverage ratio even when the value is strong. The fix depends on which number missed: rent, value, or both. You work the problem in order, from the lightest fix to the heaviest, and you decide early whether a dispute is worth the fight.
- The appraisal produces two separate numbers. Value drives leverage. Market rent drives coverage.
- On cash-out files, the rent counted is usually the lower of the signed lease or the appraiser’s market rent.
- A smaller draw, a lease renewed at documented market rent, or a corrected factual error are the lightest fixes.
- Challenges go through the lender, with evidence. They never go to the appraiser directly.
- Clearing the coverage line does not mean the property cash-flows.
Your bridge loan is ticking. The rehab is done, the tenant is in, and the appraisal shows a rent figure that makes the numbers wobble. Here is how the mechanics work, what you can fix, and when to restructure instead of fighting.
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What Is a 1007, and Why Does It Control Your Coverage Ratio?
The 1007 is the appraiser’s rent schedule. It estimates what the property should rent for, and on a cash-out refinance that estimate often sets the rent your DSCR is built on. DSCR (debt service coverage ratio) is monthly rent divided by the full monthly housing payment: principal, interest, taxes, insurance, and any HOA dues, together called PITIA.
The Freddie Mac and Fannie Mae form describes the 1007 as the Single-Family Comparable Rent Schedule. The appraiser prepares it as an attachment to the appraisal and reports an indicated monthly market rent, along with comments on the rent range, vacancy, and rent trend. Those are appraisal form names only. DSCR loans are not agency products. Small 2-4 unit properties use a different form, the 1025, which breaks out rent per unit.
Here is the part that trips up BRRRR investors. The appraisal gives you two outputs, and they act as two separate gates:
- Value sets how much you can borrow. On a cash-out refinance, most programs across our wholesale network top out around 75% LTV.
- Market rent sets whether the payment is covered. 1.00 is where many select programs start, and stronger ratios open better pricing and leverage.
A great value does not rescue thin rent. A great rent does not rescue a thin value. The lower of the two limits governs the loan.
How Underwriting Treats the Rent Number, Step by Step
Across most programs we place files with, the sequence looks like this.
1. Seasoning and basis. The clock typically starts when the deed records. Cash-out generally expects about 6 months of ownership. Before that window, some programs size off the lesser of your cost basis or the appraised value. After it, the appraisal stands alone.
2. Appraisal ordered after the work is done. That way it reflects finished work and supportable comps. Have the settlement statement, bridge payoff, rent schedule, and entity documents ready.
3. The appraiser builds the 1007. The appraiser finds comparable rentals, adjusts for size, condition, bedrooms, and location, and forms a market-rent opinion.
4. The rent figure is selected. On cash-out files, the rent counted is usually the lower of the signed lease or the market rent. An above-market lease is capped at the 1007 figure. A below-market lease holds the ratio down at the lease figure. A vacant property runs on the appraiser’s number alone, which is routine and not a red flag. This is a program convention, not a federal rule, so each program sets its own treatment.
5. The math runs. Rent divided by PITIA gives the ratio. Taxes and insurance do not shrink when rent falls. So a small rent shortfall can cut the supportable loan by more than its own percentage.
6. The outcome. The loan may be sized down, pricing may move to a different tier, or the file may need strength elsewhere, such as more cash, lower leverage, or stronger credit.
Credit and reserves ride alongside all of this. Most programs want around a 660 score, 700+ unlocks the strongest leverage tiers, and a 620 floor exists in parts of the network. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. All of it is subject to lender guidelines, and every file is underwritten individually.
For the full picture of how these loans are structured, see Lendmire’s complete DSCR loans guide.
Diagnose First: Which Number Missed?
Do this before you call anyone. A rent miss and a value miss need different evidence, and treating one like the other wastes your bridge clock.
Pull the full appraisal report and the rent schedule. Then check:
- Subject facts. Unit count, bed and bath count, square footage, finished scope. A wrong fact is the best thing you can find, because errors can be corrected.
- Comp quality. Are the rental comps similar in size and condition? Do they reflect the renovated state, or the property before you touched it?
- Lease versus market. Which figure was actually lower? If your lease was the lower number, the appraisal is not your problem.
- Value versus rent. Did the value land where you modeled it, with only the rent short? Or did both miss?
| What missed | What it changes | Best first move | Main risk |
|---|---|---|---|
| Rent only, lease was low | Coverage ratio | Renew lease at documented market rent | Tenant may not agree |
| Rent only, appraisal was low | Coverage ratio | Fix factual errors, then request a review | Review may not change it |
| Value only | Loan size (LTV) | Smaller draw or more cash in | Bridge payoff may not be covered |
| Both | Loan size and coverage | Restructure the loan first | Fighting two fronts at once |
The Fix Ladder: Lightest to Heaviest
Work down this list. Stop when the file works.
Rung 1: Draw less cash. The simplest fix is often the smallest loan that still pays off the bridge. Separate what you must pay off from what you hoped to pull out. A lower loan amount improves the coverage ratio because the payment shrinks, and it eases the leverage test too.
Rung 2: Fix the lease side. If the signed lease sat below market, the lease was the number dragging you down. Renewing at documented market rent before the appraisal can lift that side. It only helps when the lease, not the appraisal, was the lower figure. Also watch for discounted leases signed just to fill a unit, which can lower the counted rent.
Rung 3: Correct documented errors. Wrong square footage, a missing bedroom, a rehab the appraiser did not see. Send it to your loan officer or broker, who relays it to the lender. The request never goes to the appraiser directly. The process is evidence, not argument.
Rung 4: Ask for a reconsideration of value. A reconsideration of value, or ROV, is a formal request that the appraiser reassess the report. The interagency guidance describes it as a request from the financial institution that the appraiser reconsider based on deficiencies or new information, which can include comps not previously identified or property facts reported incorrectly. That guidance governs regulated banks, and non-bank DSCR channels typically follow similar practice, though it is not a rule you can lean on. The ABA Banking Journal notes that the lender acts as an intermediary rather than simply forwarding your form, and that an ROV being considered does not guarantee a changed value.
Rung 5: A second opinion. Another lender may order its own appraisal and reach a different view. That costs another fee and takes time, and it is not a re-roll. Investor anecdotes suggest that a second valuation sometimes gets blended with the first, so do not assume the higher number wins.
Rung 6: Pay off only, or wait. If the numbers still fall short, the fallbacks are cash to close, a smaller loan, waiting, or a new lender.
How to Build the Rent Evidence Packet
Evidence wins. Opinion loses. The strongest packets look like this.
| What helps | What does not |
|---|---|
| Signed leases on truly comparable units | Asking prices on listings |
| Reasoned adjustments (size, condition, location) | Your own opinion of what it is worth |
| Dated rehab list, invoices, permits, photos | A single above-market lease |
| Payment history on your own tenant | Comps that differ in unit type or size |
Keep it tight. A few strong comps beat a pile of weak ones. Many investors find that better comps matter more than higher comps. A small gap is often not worth chasing, because the dispute eats days off the bridge clock. A larger gap tied to a documented error is worth the effort.
Is the Fight Worth It? A Quick Break-Even Test
Run this before you dispute anything.
First, work out your break-even value: the bridge payoff plus closing costs, divided by the cash-out LTV cap. If the appraised value clears that number, the refinance still pays off the bridge, even if you pull less cash than you planned. If it does not, a rent fix will not save the file, and you need to restructure.
Second, stress-test the next deal. Model it on the lower of the lease and a conservative market rent. Run the value 5-10% short, using the low end of sold comps for after-repair value. If the deal still works, a low 1007 is an annoyance. If it only works at the optimistic number, the problem started at purchase.
Three Scenarios, Three Paths
These are hypothetical, with no dollar figures, to show how the logic splits.
Rent miss only. Picture a rehabbed duplex where the value lands as expected but the rent schedule comes in light, leaving coverage just under 1.00. Check whether the lease was the lower figure. If so, renew at documented market rent. If the appraisal was the lower figure and the comps look weak, build the evidence packet and send it through the lender. If neither moves the number, a smaller loan lifts the ratio. Coverage below 1.00 is also a real path through select lenders in the network, with leverage and terms adjusted.
Value miss only. Say the single-family rehab appraises under plan, but rent is strong, around 1.2x on the covered payment. Coverage is fine, so the leverage test is the gate. Draw less, bring cash to close, or contest with closed comps and an itemized rehab scope.
Both miss. Now the loan shrinks on two fronts. Do not fight both at once. Size the smallest payoff-only loan that clears the bridge, then reassess the cash-out later. Lendmire’s piece Should a BRRRR Investor Exit Hard Money on a Low Cash-Out Refinance? covers that exit.
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. The 1007 cannot estimate a nightly fee. Fannie Mae’s appraiser update says the appraiser must use comps with monthly lease rates. So a 1007 on an Airbnb property reports long-term rent. Some programs weigh hosting history instead. For short-term rental collateral, cash-out tops out around 70%, with about 12 months of hosting history and a 640+ score expected. 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.
Related-party or inherited leases. The lower figure still counts. Some programs substitute market rent when the lease is weak, so ask before ordering the appraisal.
Vacant or freshly rehabbed. The 1007 alone carries the file. Make sure the rent comps reflect the finished product.
Multi-unit. Per-unit rents are tested on the 1025, and one weak unit can pull the total down.
Ineligible property types. Manufactured homes, log homes, and barndominiums are not offered in these programs, no matter what the rent schedule says.
Mistakes That Make It Worse
- Assuming the lease counts. Usually the lower of lease and market counts, so a high lease helps little.
- Assuming market rent always wins. A below-market lease generally stays at the lease figure.
- Calling the appraiser. The request goes through the lender.
- Piling on comps. A low value is usually a dispute over adjustments. Documented errors can win, and opinion disputes usually lose.
- Expecting an ROV to be a guarantee. The appraiser must respond in writing, but nothing says the number moves.
- Confusing coverage with cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside the calculation, so a ratio over 1.00 does not mean the property cash-flows.
Preventing the Problem Next Time
Run rent comps at underwriting, before you buy. Document the rehab as you go with invoices, permits, and dated photos. Put leases on paper at market before the appraisal is ordered. And if you might sell after refinancing, ask about prepayment structure up front, since a prepay schedule is typical on these loans.
Investor stories about appeals are mixed.
Key Terms Defined
1007: The appraiser’s single-family rent schedule, which reports an indicated monthly market rent.
1025: The matching appraisal report for 2-4 unit properties, with rent per unit.
DSCR: Monthly rent divided by the full monthly payment (PITIA).
ROV (reconsideration of value): A formal request, sent through the lender, asking the appraiser to reassess the report.
Seasoning: The waiting period after you take title, typically about 6 months before a cash-out refinance.
Break-even value: The bridge payoff plus closing costs, divided by the cash-out LTV cap.
Frequently Asked Questions
Can I dispute a low 1007 rent?
Yes, but only through the lender and only with evidence. Documented errors in the subject facts or comps the appraiser missed give you the best shot. Opinion alone rarely moves the number, and a reconsideration is not guaranteed to change anything.
Does my signed lease override the appraiser’s rent?
Usually not. On cash-out files, most programs count the lower of the signed lease and market rent. A lease above market is capped, and a lease below market holds the ratio down. Each program sets its own treatment.
Will a higher appraised value fix a low rent figure?
No. Value and rent are separate gates. A strong value supports leverage, but coverage still depends on rent against the full payment. A smaller loan is the cleaner way to lift the ratio.
What if the property is vacant?
The appraiser’s market rent carries the file. That is routine on a fresh rehab. Make sure the rental comps match the finished condition.
Does a ratio above 1.00 mean the property cash-flows?
No. The ratio compares rent to PITIA only. Repairs, vacancy, management, and utilities sit outside it, so run your own cash-flow numbers too.
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. Qualification is subject to lender guidelines and credit approval. This is not a commitment to lend. Tax treatment varies; consult a qualified professional.
A low rent schedule is rarely the end of a BRRRR, but a deal that only works at the optimistic number was already in trouble.
For the mechanics of pulling equity out of a rental property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. 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. Interagency Guidance on Reconsiderations of Value of Residential Real Estate Valuations
3. ABA Banking Journal, Reconsideration of Value
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Should You Take Cash Out on a DSCR Refinance or Skip It? · Can a Co-Living or SRO Property Get a DSCR Cash-Out? · Should You Choose DSCR Cash-Out Over an Agency Loan on a Duplex?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.