The Quick Read: When there is no lease, the lender counts the appraiser’s market-rent opinion as the rent used for lender review. That single monthly figure replaces the “lower of lease or market” comparison and becomes the top half of the coverage ratio.
- The appraisal rent schedule, not your pro forma, sets the income number.
- A vacant property can still qualify, but it generally has to be rent-ready.
- Value and rent come from the same appraisal, so one report drives both tests.
- Coverage is rent compared with the full housing payment, and 1.00 is where select programs start.
- Clearing the ratio is not the same as positive cash flow.
A missing lease sounds like a dead end. It usually is not. Investors buy vacant rentals, finish renovations, and refinance between tenants all the time. The question is what rent the lender puts in the ratio when no tenant has signed anything. This article walks through how that number is built, what can change it, and where the rule bends.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
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Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
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.
What Is the Lender Actually Testing?
The lender tests whether the property’s rent covers its own monthly obligation. The ratio is rent used for lender review divided by PITIA: principal, interest, taxes, insurance, and association dues where they apply. A result of 1.00 means rent equals that full payment.
Across the wholesale network Lendmire works with, 1.00 is where select programs start. It is a floor for specific programs, not a universal standard. Stronger ratios tend to open better pricing and leverage. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Investors who want the full mechanics can read the complete DSCR loans guide.
This is a business-purpose investor loan. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal income is not the main test.
Where Does the Rent Number Come From With No Lease?
With no lease, the appraiser supplies the rent. The lender orders an appraisal that includes a rent schedule, and that schedule carries one monthly figure for the subject property.
For a single-family home or condo, the form is the Single-Family Comparable Rent Schedule, known as Form 1007. Fannie Mae’s Appraiser Update describes it as the form that documents estimated monthly market rent for a single-family investment property. The blank form itself states its purpose: giving the appraiser a familiar format to estimate the subject’s market rent. It ends in a final reconciliation of market rent, one monthly figure as of a stated date.
For two to four units, the rent analysis sits inside the Small Residential Income Property Appraisal Report, Form 1025. Those agency rules do not govern DSCR loans. DSCR files borrow the forms, not the policy.
Newer appraisal formats are changing the packaging. Fannie Mae’s UAD 3.6 FAQ says the legacy 1007 generally will not be completed separately, because market-rent estimation becomes part of the new URAR. Some files will therefore show a rental section inside the main report instead of a standalone form. The result is the same: one appraiser’s opinion of monthly rent.
How Does Underwriting Treat It, Step by Step?
Underwriting follows a short sequence. Each step matters because there is no lease to fall back on.
1. The appraisal is ordered with a rent schedule. One report carries both value and rent.
2. The appraiser builds a comparison grid. McKissock, an appraiser-education provider, explains that Form 1007 collects data from comparable one-unit rentals and compares three properties to the subject on monthly rent. The appraiser adjusts for differences such as size, condition, and location.
3. The appraiser reconciles to one number. That figure is the market rent.
4. The lender divides by PITIA. The market rent becomes the numerator. Taxes, insurance, and dues are in the denominator.
5. The file is reviewed against program limits. Leverage, credit, reserves, and property eligibility all apply on top of the ratio.
Run the logic with simple ratios. If the appraiser’s rent covers the full payment with a small cushion, the file lands around 1.1x. If the same property were reviewed at a rent 15% lower, the ratio drops toward 0.95x, which falls below the 1.00 start point for many programs. Sub-1.00 coverage is available through select lenders in the network, with leverage and terms adjusted. The point stands: one opinion moves the whole result.
Does “Missing” Mean One Thing?
No. A missing lease covers several different situations, and the rent that counts depends on which one you have. Network programs differ in the details, so treat this as the typical pattern.
| Lease situation | Rent that typically counts | Common sticking point |
|---|---|---|
| Never leased (vacant) | Appraiser’s market rent | Property must be rent-ready |
| Expired lease | Market rent, or lease if renewed | Lender may want a renewal |
| Month-to-month | Lower of lease or market | Treated like a below-market lease |
| Unsigned or incomplete | Market rent | Draft terms do not count |
| Lease cannot be produced | Market rent | Reviewer may ask for proof |
| Partly vacant multi-unit | Actual rent plus market rent on empty units | Each unit is reviewed |
When a valid lease does exist, the comparison against market rent returns. Lendmire’s piece How Much Rent a DSCR Lender Counts If the Lease Beats Appraisal covers that case.
What Does a Vacant Purchase Look Like in Practice?
Picture an investor buying a vacant single-family home on a purchase. Most files across the network land at 75%-80% LTV, which means 20%-25% down. Select high-leverage programs reach 85% LTV with roughly a 700+ score. Credit floors start around 620 in parts of the network, most programs want about 660, and 700+ unlocks the strongest tiers. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on larger balances. All of this is subject to lender guidelines and credit approval.
Now compare two outcomes on the same house. In the first, the appraiser’s market rent lands near the investor’s expectation and coverage clears 1.20x. The file is reviewed on its merits. In the second, the appraiser’s rent comes in lower, and coverage slips to about 1.02x. The investor’s pro forma never changed, but the reviewed rent did.
In that second case, leverage becomes the lever. More down payment lowers the monthly payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
A practitioner note from the broker side: files with no lease tend to go smoother when the investor hands over rental comps, listing history, and clear photos before the appraiser visits. The appraiser works from market evidence, and a tidy, rent-ready property with utilities on gives that evidence the best chance of landing accurately.
What About Refinances and Cash-Out?
A refinance on an unleased property follows the same rent logic, but the leverage rules differ. Cash-out refinances top out around 75% LTV across most of the network, and about 6 months of seasoning is the common expectation. A rate-and-term refinance can reach a higher ceiling, up to 85% on eligible files. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
Whether a particular program accepts a vacant refinance varies. Some lenders in the network want a lease in place before they will rely on market rent. Ask early, because the answer changes the plan for a property between tenants.
Where Does the General Rule Break?
Four edge cases deserve names.
Short-term rentals. The standard rent form is built for monthly leases. Fannie Mae’s Appraiser Update says the 1007 was not designed for properties used as short-term rentals, and that multiplying a nightly rate by 30 is incorrect. STR files use a different income approach. Network programs for them run to 75% LTV on a purchase, and cash-out is capped at 70%, with a 640+ score and about 12 months of hosting history 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. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Properties that cannot be comped. A home with few comparable rentals gives the appraiser less evidence. The range of the final number can widen, and the review may get harder.
Heavy rehab. A property that is not rent-ready generally cannot be appraised for rent on this path. Investors often use short-term bridge financing, finish the work, then refinance into a DSCR loan.
Projected rent after renovation. Future or after-repair rent is not the figure. DSCR files are reviewed on the rent schedule for the property as it stands.
Some property types are simply not offered in the network: manufactured homes, log homes, and barndominiums fall outside these programs.
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.
What Can You Do Before the Appraisal?
Preparation cannot change the market, but it can sharpen the evidence. A short checklist:
- Confirm the property is clean, safe, and rent-ready, with utilities on and access arranged.
- Gather recent rental comps for similar homes nearby.
- Collect listing history and a manager’s rent opinion, if you have one.
- Share photos that show condition and recent updates.
- Ask your broker which form the program expects.
What If the Appraised Rent Comes In Low?
You have options, and none of them is automatic. First, ask whether the lender allows a review of the appraisal, and submit any better comps you have. Second, adjust the structure: a larger down payment can lift coverage by reducing the payment. Third, place a tenant at market rent, which creates a lease and changes the test, though a lease above the appraiser’s figure does not lift rent used for lender review past the market number. A lease at or below it simply feeds the lower-of comparison.
Fourth, consider a different program. Select lenders in the network will review coverage below 1.00 with leverage and terms adjusted. The question to ask first is whether the low rent is a real signal about the property. If it is, the better move may be to revisit the price or the submarket, not the loan.
Coverage Is Not Cash Flow
Clearing 1.00 does not mean the property makes money. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capital expenses sit outside it. An investor can pass the test and still lose money each month. Treat the ratio as the lender’s gate, and run your own operating numbers separately.
Key Terms Defined
DSCR: Debt service coverage ratio, meaning rent used for program review divided by the full monthly housing payment.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly obligation on the property.
Form 1007: The rent schedule an appraiser completes to estimate monthly market rent on a single-family or condo investment property.
Form 1025: The small residential income appraisal report used for two- to four-unit properties.
Market rent: The appraiser’s reconciled monthly rent for the subject property as of a stated date.
Rent-ready: A property in condition to be occupied, with working utilities and safe access.
Frequently Asked Questions
Can a vacant property qualify for a DSCR loan?
Yes, in most cases. The appraiser’s market rent stands in for the lease, provided the property is rent-ready and the program allows it. Leverage, credit, and reserves still apply, and the file is reviewed under lender guidelines.
Can I use my own projected rent instead of the appraisal?
No. The qualifying figure comes from the appraisal rent schedule, not an owner estimate or a post-renovation projection. If your numbers are higher, bring comps to support them before the appraisal, not after.
Does a high lease raise the rent that counts?
Not past the market figure. When a lease exists, the lender compares it with market rent, and the lower number generally controls.
Is the nightly rate times 30 acceptable for a short-term rental?
No. Appraiser guidance calls that method incorrect, and short-term rental files use a separate income approach. Hosting history and a 640+ score are typical expectations in the network.
Will a low appraisal kill the deal?
Not necessarily. A larger down payment, a review request, or a different program path may still work.
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. Program details change, every file is underwritten individually, and nothing here is a commitment to lend. Tax treatment varies; consult a qualified professional.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker arranging DSCR investor loans through select lenders in its wholesale network, across 40 states plus Washington, D.C. — 41 markets total. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Fannie Mae Appraiser Update
2. Form 1007 / Form 1000 blank form
3. McKissock, Form 1007 and Short-Term Rental Appraisals
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 Reads Rent From a Month-to-Month Tenant · How Much a DSCR Lender Lends to a Brand-New LLC · How Much Equity a DSCR Lender Counts After a BRRRR Rehab
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.