The Quick Read: A lender treats a tenant repayment plan as proof of a debt the tenant owes you, not as extra rental income. The rent that counts toward coverage stays at the lower of the signed lease and the appraiser’s market rent. What matters is whether you can show that rent is actually arriving.
- The plan is evidence of arrears. It never adds to the rent used in the coverage ratio.
- Most files count the lower of lease rent and market rent.
- Deposits, the ledger, and the lease must tie together.
- A cash-out raises the payment, so the same rent covers less than before.
- A broken plan is an income problem. A clean plan is mostly a documentation task.
Picture a duplex with a tenant who fell behind, signed a plan, and has paid on time ever since. The owner wants to pull equity out. Will the plan sink the file? Usually not. But the way the lender reads it surprises many owners, so this article walks through it start to finish.
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What Is a Tenant Repayment Plan?
A tenant repayment plan is a written agreement where a tenant pays back past-due rent in installments, on top of regular rent. MRI Software advises that plans be written, signed by both parties, and realistic.
The plan is paid in addition to regular monthly rent, and accepting partial payment does not waive the landlord’s rights. The lease stays in force. The plan supplements it and does not replace it.
One point of confusion is worth clearing up. This is not a loan workout on your own mortgage. A forbearance or modification on your loan is a deal between you and your lender. A tenant plan is a deal between you and your tenant. The lender only sees it as a document in the file.
Key Terms Defined
- DSCR (debt service coverage ratio): the rent the lender counts divided by the full monthly payment on the property.
- PITIA: principal, interest, taxes, insurance, and any association dues, which together make up that payment.
- Arrears: rent the tenant owes from past months.
- Rent ledger: a month-by-month record of what the tenant owed and paid.
- Market rent: what an appraiser says the unit would rent for today.
- Seasoning: the waiting period after you buy before a lender allows cash-out.
- Cash-out refinance: a new loan larger than your payoff, with the difference paid to you.
How Does Underwriting Treat the Plan, Step by Step?
Underwriting treats the plan as a record of money owed, and it works through the file in a set order. No federal rule dictates this. DSCR loans are business-purpose investor loans, so each lender sets its own guidelines, and the steps below describe how most programs in the wholesale network we place files with behave.
Step 1: Pick the rent. The lender compares the in-place lease to the appraiser’s market rent and takes the lower number. An appraiser supplies that opinion on a rent schedule form. For a single-family home that is Fannie Mae’s Form 1007, and for 2-4 units it is Form 1025, per the Fannie Mae Selling Guide. These are just the appraisal forms. They do not set DSCR rules. A lease above market gets capped at market. A lease below market stays at the lease figure.
Step 2: Prove the lease is real. The file needs the executed lease, a rent ledger, and bank statements. Multi-unit properties also need a rent roll. Deposits should match the lease amount.
Step 3: Read the plan. The signed plan explains why the ledger shows arrears. Then underwriting asks one question: are payments actually arriving? A plan only helps if deposits back it up.
Step 4: Handle deposits above lease rent. Plan installments sit on top of regular rent, so monthly deposits can run higher than the lease. Label each deposit as regular rent or plan installment. That lets the underwriter tie every dollar to a document. The lender still counts lease or market rent, never the inflated deposit total.
Step 5: Apply the fallback if needed. If payments do not support the lease, the lender may use market rent only. It may also decline to treat the unit as stabilized.
Step 6: Test against the new payment. A cash-out raises the loan balance and the payment. The same rent covers less than before. Coverage is rent divided by the new payment, so the denominator is the real pressure point.
Where Do the Program Numbers Land?
Across most programs in the wholesale network we work with, a standard rental cash-out tops out around 75% LTV (loan-to-value, the loan as a share of the property’s value). Lenders typically expect about 6 months of seasoning, measured from title recording. Coverage of 1.00 is where select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
Credit floors begin around 620 in parts of the network. Most programs want closer to 660, and 700 or more opens the strongest leverage tiers. Reserves commonly run about 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Standard programs go up to $3,000,000. All of this is subject to lender guidelines, and every file is underwritten individually.
Two cautions. First, clearing 1.00 is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the calculation. Second, available equity depends on rent, payment, reserves, and the 75% ceiling together. It is not a guaranteed cash figure. For the full picture, see Lendmire’s complete DSCR loans guide.
How Does the Tenant’s Payment History Change the Read?
The track record decides how the lender reads the plan. The table shows typical treatment, which varies by lender.
| Situation | Rent the lender leans on | What the file needs |
|---|---|---|
| Clean plan, on-time payments | Lower of lease and market | Ledger and deposits that tie |
| Recent missed installments | Possibly market rent | Explanation, proof of recovery |
| Months behind, plan broken | Market rent only, or the unit ignored | Re-lease or cure first |
| Eviction filed | Market rent or zero | Resolution of the notice |
| Month-to-month or expired lease | Market rent often carries it | Current lease or renewal |
| One delinquent unit in a portfolio | Pooled rent vs pooled payment | Clean records on every door |
A clean plan is mostly a paperwork exercise. A broken plan changes the income itself. That is the dividing line. Missed installments are a collection problem for you, but they become an underwriting problem when the lender cannot trust the rent is coming in.
An eviction filing creates a direct conflict. A lease that says rent is current, sitting next to a non-payment notice, forces the lender to pick the safer number. A vacant, rent-ready unit is actually easier, because market rent applies cleanly.
Portfolio and blanket loans add a twist. Coverage is tested on pooled rent against the pooled payment, so one delinquent door drags down the whole pool.
One Property, Three Tenant Situations
Run the numbers on a single hypothetical duplex that clears about 1.25x on lease rent before any cash-out. Say you refinance to the 75% LTV ceiling and the new payment pushes coverage down to roughly 1.10x. That is the cash-out effect alone. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Now change the tenant situation.
Scenario one: clean plan. Lease rent equals market rent. Deposits tie to the ledger. The lender counts lease rent, and coverage sits near 1.10x. The plan barely matters.
Scenario two: lease above market. The appraiser’s market rent comes in lower than the lease. The lender caps at market, and coverage slips toward 1.00x. Same tenant, same plan, different number. The plan did not cause this. The rent selection step did.
Scenario three: plan breaks, months behind. The lender may count market rent only, or ignore the unit. Coverage could fall below 1.00x. Depending on the file, a sub-1.00 path is available through select lenders in the network, with leverage and terms adjusted. Another option is to cure or re-lease first and apply afterward. Either way, qualification stays subject to lender guidelines, credit approval, and property review.
These ratios are modeled assumptions, not market data.
What Should You Assemble Before Applying?
Preparation does most of the work here. A tidy file turns a messy tenant story into a simple one.
- The executed lease, plus a rent roll for multi-unit properties
- The signed repayment plan, with both parties’ signatures
- A rent ledger showing arrears and payments
- Bank statements with every deposit visible
- A short letter of explanation covering why the arrears arose
- The appraisal rent schedule, which the lender orders
- Entity documents and reserve statements, as the program requires
A good plan names the lease by date and address, states total arrears, and shows how each payment splits between arrears and current rent, as Genie AI’s template illustrates. Label deposits by purpose. Underwriters reward a file they can read in one pass.
LLC-titled properties are possible, subject to program terms, so entity papers belong in the stack.
Cash Out Now, Wait, or Re-Lease First?
The real investor decision has three branches.
Cash out now fits when the ledger is clean, deposits are on time, and coverage still clears comfortably on the new payment. The plan is just a footnote.
Wait for the plan to finish fits when payments are recent and shaky. A few more clean months let the ledger speak for itself. If you are close to the roughly 6-month seasoning mark anyway, waiting costs little.
Re-lease first fits when the plan has broken down or the rent evidence conflicts with the arrears record. A fresh lease at market rent gives the lender something clean to count.
A thin coverage ratio makes the choice more urgent, since the larger payment leaves less cushion. A rate-and-term refinance, which returns no cash, is another option. Programs allow up to 85% LTV on that structure, with no cash back at closing. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
For related reading, see Lendmire’s piece Can You Get a Cash-Out Refinance While a Tenant Is on a Repayment Plan?.
What Does a Credible Plan Look Like to a Lender?
Underwriters see plenty of plans. They can tell a real one from a stall. A credible plan has realistic installments, a clear start date, and a requirement to keep current rent paid. It leaves a payment trail that matches the ledger.
A stall looks different. Installments are tiny next to the arrears. Payments are irregular. Deposits do not match any document. Here is the catch: the lender never judges your intentions. It judges evidence. Written terms plus matching deposits is the combination that works.
Forgiving arrears changes the record too. If you forgive back rent, document it in writing and update the ledger. Otherwise the file shows a balance that no longer exists.
Common Misconceptions
A signed plan counts as extra income. It does not. It documents a debt, and counted rent stays at the lower of lease and market.
A late tenant is like a late mortgage payment. No. A late tenant is a collection problem. A late loan payment is a default. Underwriting treats them very differently.
The tenant has to move out for a cash-out. They do not. A tenant in place is the normal state.
DSCR means no paperwork. It skips the personal-income packet, since the loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. It still needs lease, rent proof, property documents, entity papers, and reserves.
The plan resets the lease. It generally supplements the lease and does not replace it.
Frequently Asked Questions
Does a repayment plan hurt my chances on a DSCR cash-out?
Not by itself. A plan with a clean payment record is usually a documentation task. The risk comes when payments stop or deposits do not match the ledger, because then the lender questions whether the rent is collectible. Outcomes remain subject to lender guidelines.
Will the lender count the plan installments as rent?
No. Counted rent stays at the lower of the lease and the appraiser’s market rent. Installments are repayment of a past debt. They explain deposits above lease rent, but they do not raise the figure used in the coverage ratio.
What if my tenant misses a plan payment during underwriting?
Expect questions. The lender may fall back to market rent if the unit counts as leased, and it will want an explanation and proof of recovery. Months of misses can mean the unit is not counted at all. Curing or re-leasing first is often cleaner.
Do I need an appraisal rent schedule?
Yes, in most files. The appraiser’s market-rent opinion is what the lender compares to your lease. For a single-family home that is Form 1007, and for 2-4 units it is Form 1025, as listed in the Fannie Mae forms index. These forms supply the rent opinion only and do not set DSCR rules.
How does one behind unit affect a multi-unit loan?
On a single property, the lender looks at each unit’s rent evidence. On a portfolio or blanket loan, coverage is tested on pooled rent against the pooled payment, so one delinquent door pulls down the pool.
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 mortgage broker that arranges financing through select lenders in its wholesale network, covering 41 markets, including Washington, D.C. Reach the team at 828-256-2183 or request a quote.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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. MRI Software, past-due rent payment plans
2. Fannie Mae Selling Guide B4-1.2-01
3. Genie AI promise-to-pay template
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: Best DSCR Cash-Out Refinance Program After a Quitclaim Deed · Best DSCR Cash-Out Refinance Program on Your Only Rental for a Roof · Best DSCR Cash-Out Refinance Program With a Month-to-Month Tenant
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.