The Quick Read: On most DSCR files, the lender counts the lower of the signed lease and the appraiser’s 1007 market rent, so a lease above market adds nothing to coverage and a lease below market pulls it down. The 1007 is an appraiser’s opinion of what the property should rent for. The lease is a contract that shows what the tenant actually pays. Treatment varies by program, so confirm the rent basis before the appraisal is ordered.
- A lease above market usually gets capped at the 1007 figure.
- A lease below market usually stays at the lease figure.
- A vacant property is carried by the 1007 alone.
- Short-term rentals are not priced on a 1007 at all.
- Coverage compares rent to PITIA only. It is not a cash-flow test.
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. That is why rent evidence carries so much weight, and why this choice between two rent figures matters. The sections below referee both sides. They also show where each one helps, where each one hurts, and what to document.
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As of Oct 29, 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
| Factor | 1007 Rent Schedule | In-Place Lease |
|---|---|---|
| What it is | Appraiser’s opinion of market rent | Contract between owner and tenant |
| Who produces it | Licensed or certified appraiser | Borrower and tenant |
| What it proves | What the property should rent for | What the tenant actually owes |
| Documentation | Appraisal with the form attached | Executed lease plus proof of payment |
| Property types | One-unit homes and condos; 2-4 units use a different form | Any rented unit, per-unit on multi-unit |
| Vacant property | Carries the file alone | Not available |
| Entity vesting | Not affected by the vesting | Lease should match the owning entity |
| Short-term rentals | Not designed for nightly rent | Not a monthly lease at all |
| Reserves | No direct effect | No direct effect |
| Timeline | Tied to the appraisal being ordered and completed | Already exists before the file starts |
The reserve row is the same on both sides on purpose. Reserves depend on the lender, the leverage, the loan size and the transaction type. Across most programs in the wholesale network, reserves commonly run about 6 months of PITIA, stepping up to about 9 months above $1,500,000, subject to lender guidelines. Neither rent figure changes that rule. Entity vesting works the same way. Whether a file can close in an LLC depends on program eligibility, and the lease should name the entity that owns the property.
What the 1007 Actually Is
The 1007 is an appraisal attachment. Fannie Mae’s form page describes the Single-Family Comparable Rent Schedule as the way a lender gets market rent for a one-unit investment property from the appraiser. The same page says adjustments belong only where the comparables differ significantly from the subject. It also says rent concessions are adjusted to the market, not to the subject.
The form is built on three nearby rental comparables. The appraiser adjusts them and reconciles to a final monthly market rent. McKissock, an appraiser-education provider, notes that the form covers one-unit single-family and condo properties. It adds that the lender makes the final income determination, not the appraiser.
One distinction matters. The 1007 comes from the agency world, but DSCR loans are not agency products. Rent treatment on a DSCR file is set by the lender and the program. On 2-4 unit properties, the rent analysis sits in the small residential income property appraisal form instead.
What an In-Place Lease Actually Proves
A lease proves the tenant owes a stated amount. It does not prove the tenant pays it, and it does not prove the amount is reasonable for the area. A lender reading a lease asks three questions. Is it executed and current? Does the rent match what the tenant is actually paying? Is the tenant at arm’s length?
Payment evidence is what separates a clean lease file from a stalled one. A security deposit receipt and a few months of rent deposits go a long way. A lease with no payment trail is a document, not evidence.
How the Lower-of Convention Works
The lower-of convention is a practitioner habit, not a regulation. An investor-education post on BiggerPockets describes the 1007 as the rent a property would reasonably get if listed today, and says lenders typically credit the lower of that figure and the in-place rent. That post is dated and written by a practitioner, so treat it as a description of common practice, not a rulebook.
Here is the pattern most programs in the network follow, subject to lender guidelines:
| Situation | Typically credited |
|---|---|
| Lease above market | Market rent; the premium is ignored |
| Lease below market | The lease |
| Lease at market | Either figure |
| Vacant | 1007 market rent alone |
| Month-to-month or expired | Market rent, often with lease or history as support |
Not every lender runs it this way. Some programs use market rent only. A few use the lease whenever one exists. The spread is real, and it is why the rent basis question comes before the appraisal order, not after.
When the 1007 Is the Better Fit
The 1007 carries the file in four situations.
A vacant, rent-ready property. There is no lease, so market rent is the only number. The quality of the comps decides the outcome.
A purchase with no lease handed over. The seller may have no lease worth using, or the buyer plans to re-tenant. The appraiser’s figure stands in.
A stale below-market lease the investor plans to reset. If the tenant has paid the same rent for years, the 1007 shows what the unit should earn. Some programs will count market rent in this case. Others will not, so confirm first.
A lease that looks unrepresentative. Month-to-month arrangements and related-party tenants draw closer review. Market rent often governs there.
The risk on this side is a low 1007. Common causes are stale comps, poor comp selection and heavy adjustments. Appraisal reconsideration is a routine step, not an emergency move. A packet with recent, closer rental comps and a clean explanation of condition differences is the reasonable way to ask. The realistic limit is that the appraiser still forms the opinion, and the options for rebuttal or a transfer depend on the program.
When the In-Place Lease Is the Better Fit
The lease carries the file when it is current, paid and below or near market.
A seasoned tenant at a fair rent. The lease and the 1007 land close together. The lease adds paper proof that the income is real, which can make the file easier to review.
An appraisal that comes in low. Where a program counts the lease whenever one exists, a lease that sits above a thin 1007 can rescue coverage. That depends on the program. Under the lower-of convention it will not.
A property where comps are scarce. In thin rental submarkets, a documented payment history is stronger support than a stretched comp set.
The catch on this side is the above-market lease. Under the lower-of approach, the premium is ignored. An investor who signed a high rent to help the numbers will not see the extra credit. A lease signed just before the appraisal at a discount is a second problem, because it can pull the counted rent down and invite questions.
A Worked Comparison
Run the numbers on one property with a fixed monthly obligation, PITIA, held constant. Coverage is rent used for lender review divided by PITIA.
- Lease above the 1007. The counted rent is the 1007 figure. Coverage might clear roughly 1.15x.
- Lease below the 1007. The counted rent is the lease. The same property might land near 1.00x, right at the edge of where many select programs start.
- Vacant. The counted rent is the 1007 alone. Coverage lands wherever the appraiser’s figure puts it.
Same house, same payment, three different numerators. The 1.00 level is where many select programs start. A separate path through select lenders in the network takes coverage below 1.00, with leverage and terms adjusted. Those are different paths, not one program with a moving floor.
Clearing 1.00 does not mean the property cash flows. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities and capital expenses sit outside the calculation.
Purchase, Refinance and Cash-Out
The same rent question shifts with the transaction.
On a purchase, leverage on most files lands at 75%-80% LTV, so coverage and equity both matter. A weak rent figure can cost leverage or pricing tier. On a rate-and-term refinance, the ceiling is up to 85% LTV on select programs, and the rent figure again sets the coverage. On a cash-out refinance, leverage tops out at 75% LTV on standard rentals, and about 6 months of seasoning is the common expectation. Because the loan is larger, the rent number leans harder on the file.
A bigger down payment can lift coverage by shrinking the payment. It does not erase leverage caps, credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Credit matters alongside rent. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers.
Before the Appraisal: Prep That Prevents Problems
Most rent-figure trouble is preventable.
1. Ask which rent basis applies. Lower-of, market only and lease only all exist. Get the answer before the appraisal is ordered.
2. Build your own rent estimate first. TrueCap, an investor tool blog, suggests investors form their own view of rent so the 1007 can be checked against it.
3. Assemble lease evidence. The executed lease, a deposit receipt and recent rent deposits. For 2-4 units, a rent roll or per-unit leases.
4. Plan tenant access. An uncooperative tenant can slow an interior inspection. Give notice early.
5. Consider timing on renewals. Renewing a stale, below-market lease at a documented market rent before applying can raise the counted rent. It needs the tenant’s agreement. A discounted lease signed just before the appraisal does the opposite.
6. Match the lease to the owner. If the property is vested in an LLC, subject to program eligibility, the lease should name that entity.
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.
Multi-Unit, Short-Term and Edge Cases
On multi-unit properties, rent is assessed per unit. An above-market unit does not offset a below-market one. That is practitioner convention, so confirm it with the program.
Short-term rentals are a different animal. Fannie Mae’s appraiser guidance says the 1007 was not designed for short-term rental properties, since it calls for monthly market rent and cannot estimate a nightly fee. Multiplying a nightly rate by 30 is not a valid 1007 method. Short-term rentals on DSCR files run on their own structure: purchase leverage to 75% LTV, refinance around 70%, and cash-out at 70%, with a 640 or higher score and about 12 months of hosting history expected. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Related-party tenants and rent-stabilized units draw closer review. Treat any single-lender claim on those as something to verify, not a rule.
Questions to Ask Before You Order the Appraisal
- Is the counted rent the lower of lease and 1007, market rent only, or the lease?
- How are month-to-month and expired leases treated?
- What proof of payment is required?
- How does the program treat a lease signed shortly before the appraisal?
- What is the process if the 1007 comes in low?
- Does the program differ for 2-4 unit rent rolls?
For the full picture of how these files fit together, see Lendmire’s complete DSCR loans guide. For a deeper look at purchases specifically, there is Lendmire’s piece 1007 Market Rent vs Lease in Place on a DSCR Purchase.
Key Terms Defined
1007 rent schedule: An appraiser’s opinion of monthly market rent for a one-unit investment property, attached to the appraisal.
In-place lease: A signed rental contract showing the rent a tenant currently owes.
Market rent: What comparable properties nearby would reasonably rent for today.
Lower-of convention: The common practice of crediting the smaller of the lease rent and the market rent.
PITIA: Principal, interest, taxes, insurance and any association dues, the full monthly obligation used in the coverage ratio.
The Verdict
Neither figure is better in the abstract. The 1007 is the independent number, and it is often a strong option on a vacant property. The lease is the proof number, and it helps most when it is current, paid and near market. Under the lower-of approach, the investor gets whichever is smaller, so the practical goal is to make the two numbers agree. A fair lease, a clean payment trail and a well-supported 1007 give a lender fewer gaps to review. Qualification is still subject to lender guidelines, credit and property review.
Frequently Asked Questions
Does the 1007 replace a lease?
No. The lease documents actual rent, and the 1007 estimates market rent. Lenders may use either or both, depending on the program.
Does an above-market lease raise my DSCR?
Generally not. Under the lower-of approach, the appraiser’s market rent caps the counted figure. Some programs that lean on the lease may count it, so ask before ordering.
Is the lower-of rule a regulation?
No. DSCR loans are business-purpose products, so rent treatment is set by the lender.
What if the property has no lease?
The 1007 market rent stands in. On a vacant, rent-ready property, the quality of the rental comps largely decides the outcome.
Why can my numbers change after the appraisal?
Any coverage figure run before the appraisal is an estimate. Once the 1007 lands, the counted rent can move, and so can the coverage ratio and the leverage tier.
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 broker arranging financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Reach the team at 828-256-2183 or request a quote. Programs change and every file is reviewed individually, so none of this is a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
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References
1. Fannie Mae Single-Family Comparable Rent Schedule (Form 1007)
2. McKissock Learning, Form 1007 and short-term rental appraisals
3. BiggerPockets, Investor Financing 101: 1007 Form
4. TrueCap, how investment property appraisals work
5. Fannie Mae Appraiser Update
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: DSCR Loan vs Asset Depletion Loan for an Investor With Many Rentals · Does a DSCR Loan Need a 1007 Rent Schedule? · Can You Still Get a DSCR Loan When the Lease Is Above Market?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.