The Quick Read: A DSCR lender takes the supported rent on each unit, adds the two units together, and divides that total by one full building payment, subject to lender guidelines. “Broad Ripple” here is only a label for a two-unit property in a walkable urban neighborhood, not a market figure.
- Each unit is tested on its own: the lease or the appraiser’s market rent, whichever is lower.
- The two counted rents are summed and divided by the full payment (principal, interest, taxes, insurance, and any HOA or flood cost).
- A lease above market adds nothing. A lease below market holds the ratio down.
- Clearing 1.00 means rent covers the payment. It does not mean the property cash flows.
- Select programs start at 1.00; a separate select-lender path goes below 1.00 with leverage and terms adjusted.
Key Terms Defined
DSCR (debt service coverage ratio): monthly rent used for lender review divided by the monthly housing payment.
PITIA: principal, interest, taxes, insurance, and association dues, plus flood coverage when it applies.
Rent schedule: the appraiser’s unit-by-unit opinion of what each unit should rent for in the open market.
Rent roll: the borrower’s list of each unit, its tenant, its lease terms, and its current rent.
LTV (loan-to-value): the loan amount as a percentage of the property’s appraised value.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 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 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.
Why a Duplex Is One Building and One Number
A duplex is one rental property with one loan. The lender does not run two separate ratios. It builds one rent figure from both units and sets it against one payment.
That is why a duplex can look stronger than a single-family home. Two rent streams share one set of building costs. If one unit is briefly empty, the other unit still counts, though the ratio drops with it.
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. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Your personal paycheck is not the headline test.
How Underwriting Reads the Rent, Step by Step
Here is the sequence on a typical file across Lendmire’s wholesale network.
1. The appraisal is ordered. A two-to-four-unit property gets a small residential income appraisal. That one report gives a value, which drives LTV, and a market rent per unit, which drives coverage.
2. The appraiser builds market rent unit by unit. The agency-published form for two-to-four-unit properties tells the appraiser to reconcile rental comparables into an opinion of market rent for each unit. Lenders in the network borrow the form by convention. They do not follow agency rules, and each program sets its own rent policy.
3. You supply leases and a rent roll. The form’s layout also captures each unit’s lease status, current rent, and market rent. Your documents fill in the actual side.
4. The lender takes the lower figure, unit by unit. Most programs count the lease or the appraiser’s market rent, whichever is lower. A lease above market is trimmed to market. A lease below market stays at the lease.
5. The units are summed. Both counted rents are added together.
6. The total is divided by PITIA. The result is the ratio, compared with the program’s floor.
One detail trips people up. The duplex appraisal already contains its own rent schedule, so a separate single-family rent form is generally not needed. The appraiser reports rent at the unit level, as this walkthrough of the 1025 form describes.
Where the Rent Number Comes From
| Situation | Typical rent counted | Usual proof |
|---|---|---|
| Lease at market | Lease or market (about equal) | Lease, rent roll |
| Lease above market | Appraiser’s market rent | Lease, payment history |
| Lease below market | The lease | Lease, rent roll |
| Month-to-month tenant | Often the lower figure, program-dependent | Rent roll, payment history |
| Vacant unit | Appraiser’s market rent, if the program allows | Appraisal rent schedule |
Treat the table as the common pattern, not a rule for every lender. Programs differ on vacant units and on month-to-month tenants. Confirm the rent basis before the appraisal is ordered.
Only base rent counts on most programs. Pet fees, parking, storage, and utility reimbursements are generally left out.
A Modeled Unit-by-Unit Walkthrough
Picture a two-unit property in a walkable urban neighborhood like Broad Ripple. These are modeled assumptions, not market data, and no dollar figures are used.
- Unit A: the lease sits above the appraiser’s figure. The lender counts market rent.
- Unit B: the lease sits below the appraiser’s figure. The lender counts the lease.
- Building total: the two counted rents added together.
Say that total clears the full payment at roughly 1.15x. That meets a 1.00 floor with room to spare.
Now keep the rent exactly the same and let the payment side move. Taxes reassess, or insurance climbs, or a flood requirement appears. Coverage can slide toward 1.00 or below without one dollar of rent changing. Nothing about the tenants changed. The denominator did.
The fix is rarely about the lease. A larger down payment lowers the 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.
Where the General Rule Breaks
One unit vacant. You lose half the income. If the program allows a vacant unit, that unit depends entirely on the appraiser’s opinion of market rent. Some programs want it leased first. Rules vary by lender.
A lease above market. The appraisal is the ceiling. An impressive lease adds nothing, which is why you should never model a deal on the lease alone.
A legacy lease below market. The lease governs. A documented renewal at market can lift the count, but only where the old lease sat below the appraiser’s figure.
A short-term rental unit. The rent forms assume monthly rent and have no nightly-rate method. Short-term rental files run on platform history instead. Across the network, purchase leverage on short-term rentals tops out at 75% LTV, and lenders typically want a 640+ score and about 12 months of hosting history. 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.
An owner-occupied duplex. If you will live in one unit, this is not the right product. A house-hack usually uses owner-occupied financing instead. DSCR fits when both units are rented to others.
An older or converted building. Character-home conversions, unusual layouts, or a second unit without clear permits can complicate the appraisal and the rent opinion. Ask the lender how it treats those before you commit.
Five or more units. Commercial-style underwriting takes over, with a net-operating-income test instead.
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.
Gross Rent, Not Net Operating Income
This is the most common mix-up. On one-to-four-unit rentals, DSCR compares rent to PITIA. It does not deduct vacancy, management, repairs, or utilities from the rent first.
That makes the ratio simple, and it is also why the ratio flatters a property. Clearing 1.00 is not positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. A duplex can clear coverage and still leave you thin after real-world costs.
What Moves the Inputs on a Walkable Urban Duplex
Treat these as variables to verify, not statistics.
- Rent-source spread. A listing estimate, a property manager’s view, and the appraiser’s schedule can all differ. Which figure counts for qualifying depends on the program and on whether a lease is in place, so confirm the approach with your loan officer rather than assuming the appraiser’s number is the only one. Sanity-check your rent against comparable local rents before relying on it.
- Tenant demand. Look at employment, lease length, and vacancy in the area.
- Payment side. Taxes, insurance, and any flood cost all raise the denominator. Budget for them, since they vary by county and property.
- Building age. Older stock can mean more repair spending and trickier appraisals.
Program Numbers in Context
These are typical ranges across select lenders in the wholesale network. Every file is underwritten individually, and nothing here is a commitment to lend.
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
- Purchase leverage: most files land at 75%–80% LTV on an investment property purchase. Select high-leverage programs can go higher with a stronger score.
- Cash-out refinance: tops out around 75% LTV on standard rentals.
- Credit: a 620 floor exists in parts of the network. Most programs want about 660, and 700+ unlocks the strongest leverage.
- Reserves: commonly around 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Some conservative files see reserves waived.
- Loan size: up to $3,000,000 on standard programs.
For the full picture, read Lendmire’s complete DSCR loans guide. For a parallel look at the same rent logic in another market, see Lendmire’s piece How a DSCR Lender Reads Rent on a Sacramento Duplex.
Document Checklist Before You Order the Appraisal
- A signed lease for each unit.
- A rent roll listing every unit, tenant, term, and rent.
- Proof of rent payment, such as deposits or bank records.
- Current insurance quotes, including flood if the property needs it.
- HOA details, if any.
- Your entity paperwork, if buying through an LLC, subject to lender program eligibility.
Frequently Asked Questions
Does the lender use the lease or the appraiser’s rent?
Usually the lower of the two, unit by unit. A lease above market is trimmed to the appraiser’s figure. Program details vary by lender.
Does one vacant unit sink the file?
Not automatically, but it makes the file harder. Some programs count market rent on a vacant unit. Others want it leased first. Either way, the ratio leans on the appraiser’s opinion for that unit.
Is the ratio based on gross rent or net income?
Gross rent over PITIA on one-to-four-unit properties. No operating expenses come out first. That is why 1.00 is not the same as cash flow.
Can I live in one unit?
Not with this product. DSCR loans are for non-owner-occupied investment properties. Owner-occupied duplex purchases normally use different financing.
Do my other rentals affect the ratio?
The ratio itself is property-level. Credit, reserves, and experience still matter to eligibility, and some lenders trim leverage for first-time investors.
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. Tax treatment varies; consult a qualified professional.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets, including Washington, D.C., with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
See your offer in seconds. No credit pull, no obligation.
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/Freddie Mac Form 1025/72
2. NJ Real Estate Appraisal blog – Form 1025 guide
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Rent Appeal vs New Lender After a DSCR Market Rent Denial · How Much Rent a DSCR Lender Counts on a Seasonal Beach House · How Much a DSCR Lender Lends on an Unseasoned Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.