The Quick Read: The best provider for an under-rented property depends on how its program counts rent, and across most programs in Lendmire’s wholesale network the counted rent is the lower of the signed lease and the appraiser’s market rent. A below-market lease therefore caps the coverage ratio and the cash-out the rent can support, even when the property carries plenty of equity.
- Most programs count the lower of the in-place lease and the appraisal’s market rent; some use the appraisal figure alone.
- Cash-out on standard rentals tops out around 75% LTV, with about 6 months of seasoning common.
- 1.00 coverage is where many select programs start; a separate select-lender path goes below 1.00 with leverage and terms adjusted.
- Taxes, insurance and dues do not shrink when rent does, so a rent discount hits coverage harder than its size suggests.
- The right fit comes from matching the lease situation to a program’s rent policy, which is what a broker shopping multiple wholesale lenders does.
No list of companies appears here. A ranking of lender names would not help an investor with a legacy lease, because the ranking changes with the file. What matters is how providers treat the rent, and which questions to ask before applying. Lendmire is a mortgage broker, not a lender. It arranges DSCR investor loans through select lenders in its network across 40 states plus Washington, D.C. For the full picture of how these loans work, see the complete DSCR loans guide.
DSCR Cash-Out Calculator
Run the cash-out numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Nov 5, 2026
Prefilled with starting assumptions — enter your property’s value, balance, taxes, and insurance for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Nov 5, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Property value, balance, taxes, and insurance are editable estimates. Maximum loan-to-value varies by lender, program, property type, and seasoning. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Key Terms Defined
DSCR (debt service coverage ratio): Qualifying monthly rent divided by the monthly housing obligation on the new loan.
PITIA: Principal, interest, taxes, insurance and any association dues, the full payment the rent has to cover.
Rent schedule: The appraiser’s estimate of market rent, prepared on Form 1007 for a single-family home or Form 1025 for two to four units.
Seasoning: The ownership period a lender expects before it will size a cash-out refinance on current value, measured from title recording.
Cash-out refinance: A new loan larger than the payoff, with the difference returned to the borrower after costs.
Below-market lease: A signed lease whose rent sits under what the appraiser says comparable units rent for.
What Does a Below-Market Lease Do to a DSCR Cash-Out?
A below-market lease usually lowers the rent the lender counts, which lowers the coverage ratio and the loan the rent can support. Equity is only half the test. The loan has to clear both an LTV ceiling and a rent-coverage floor, and the lower rent pushes on the second one.
Scotsman Guide describes DSCR as a non-QM investment-property product that looks mainly at whether the property covers the payment rather than at personal income, and notes that requirements vary from lender to lender. That variation is the whole story on a below-market lease. No federal rule sets how rent is counted. Each program writes its own policy.
Picture a long-held duplex with a lot of equity and a tenant who has paid the same rent for years. The owner wants to pull cash out. The equity supports a 75% LTV loan comfortably. But the new loan is larger than the old one, so the payment goes up, and the stale rent has to cover it. Run it through the formula and the ratio can land near or under 1.00, even though the property looks strong on paper. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
How Underwriting Treats the Rent, Step by Step
Underwriting counts one rent figure, tests it against the new payment, and sizes the loan to the tighter of the LTV limit and the coverage floor. Six steps cover it.
1. Pick the cash-out amount. The new loan is the payoff plus the cash requested, measured against appraised value. A bigger loan means a bigger payment, so the same rent covers less.
2. Order the appraisal. One report does two jobs. It sets value, which drives LTV, and it sets market rent, which drives coverage. For a single-family home the rent estimate comes on Form 1007, the Single-Family Comparable Rent Schedule. Two- to four-unit properties use Form 1025.
3. Collect the lease and proof of rent. That means an executed lease, plus deposits or payment history where the program asks for them.
4. Choose the rent figure. On an occupied unit, the common choice is the lower of the lease and the appraisal’s market rent. A vacant unit uses market rent alone. Some programs use the appraisal figure only.
5. Divide by PITIA. Rent over the full monthly obligation gives the coverage ratio. Taxes, insurance and dues stay fixed no matter which rent is counted.
6. Test against the floor, then size the loan. Across most of the network, 1.00 is where select programs start, and stronger ratios open better pricing and leverage. Reserves and credit are tested alongside it.
The 1007 is an appraisal form borrowed from the agency world. Fannie Mae’s Selling Guide requires it on a one-unit investment property only when rental income is used to qualify. DSCR loans are not agency loans, and agency rules do not govern them. The form is simply the common tool for getting a market rent number.
Where Providers Differ on Rent (Criteria, Not a Ranking)
Providers differ on which rent they count, what proof they want, and how they handle old leases. Lender names tell you little. Policy tells you everything.
| Criterion | Lower-of policy | Appraisal-only policy | Lease-based policy |
|---|---|---|---|
| Rent counted | Lesser of lease or market | Market rent only | Signed lease |
| Below-market lease | Lease caps the rent | Lease ignored | Lease caps the rent |
| Above-market lease | Excess not counted | Excess ignored | Excess may count |
| Typical proof asked | Lease plus payment history | Appraisal only | Lease plus deposits |
| Fit | Stable, documented tenants | Stale or messy leases | Recently signed leases |
Across a wholesale network, all three policies show up. A broker matches the file to the policy that treats it best. That is a real advantage over going to a single lender, which has one policy and applies it to everyone.
Lease Scenarios: What Gets Counted
How the rent is counted shifts with the lease situation. This table shows the usual treatment across programs in the network, though each lender sets its own.
| Lease situation | Rent usually counted | Typical documents | Effect on cash-out |
|---|---|---|---|
| Below market | Lease rent (lower-of) | Lease, payment history | Smaller loan supported |
| At market | Lease or market, same | Lease, appraisal | Full sizing available |
| Above market | Market rent (excess dropped) | Lease, appraisal | Sized on market rent |
| Month-to-month | Often market rent | Proof of occupancy | Depends on program |
| Expired | Often market rent | Renewal or rent receipts | Ask the provider |
| Vacant | Market rent | Appraisal | Sized on market rent |
Month-to-month and expired leases are where programs diverge most. Some lean on the market rent and ask for little. Others want a renewal or a rent history. Ask before ordering the appraisal, not after.
A Modeled Example: Same Property, Two Rents
Run the numbers on a modeled duplex with a lease well under the appraiser’s market rent. The inputs below are assumptions, not market data.
- Assume a new loan at the 75% cash-out LTV ceiling for a standard rental.
- Assume the lease rent covers the full monthly obligation at roughly 0.90x.
- Assume the appraisal’s market rent covers the same obligation at roughly 1.15x. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
On a lower-of program, the lease governs and the file sits under 1.00. On an appraisal-only program, the same file reads 1.15x. The property did not change. The rent policy did.
Under 1.00, there are paths a lender may review. A select-lender path in the network goes below 1.00 with leverage and terms adjusted. A smaller cash-out lowers the payment and lifts the ratio. Extended terms or interest-only periods, available through select lenders in the network, can change the payment profile. Whether any of these work depends on the lender, credit, reserves and property review, and none is a commitment to lend.
One caution on the 1.00 mark. Clearing it is not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities and capital costs sit outside the calculation.
Where the General Rule Breaks
The lower-of convention has exceptions, and most of them are worth knowing before the appraisal is ordered.
Lease above market. On a lower-of program, the extra rent is not counted. Some programs use only the 1007 rent figure, while others may allow a variance when a lease exists, so the policy depends on the lender the file is matched to.
Short-term rentals. These use different income logic. In the network, STR cash-out tops out at 70% LTV, and programs generally expect a 640+ score and about 12 months of hosting history. A rental that earns well nightly can still show a low 1007 figure.
Related-party tenants. Expect market rent and closer review.
Property types. Manufactured homes, log homes and barndominiums fall outside the network’s DSCR programs, so a below-market lease on one of them is a moot point.
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.
Cash Out Now, Renew First, or Take Less?
Renew at market before the appraisal. If the tenant agrees and local rules allow it, a rent reset documented before the appraisal can lift the counted rent. Rent-regulation and notice rules vary by location, so check them before raising rent. A renewal can be worth more than rushing the refinance.
Take less cash. A smaller loan means a smaller payment, which lifts coverage. The 75% ceiling is a cap, not a target.
Wait for the lease to roll. If the lease ends within the year, a short wait can change the file.
Other levers exist. A larger equity stake lowers the payment and can lift the ratio, but it never erases leverage caps, credit floors, reserve rules or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Provider-Selection Checklist
Ask each provider the same questions. The answers sort the options faster than any ranking.
- Which rent does the program count: the lease, the appraisal, or the lower of the two?
- Can an above-market lease be supported with rent receipts, or is the excess ignored?
- What is the coverage floor on cash-out, and is a sub-1.00 option available through a select lender?
- What proof is needed on month-to-month, expired or related-party leases?
- How is value sized inside the seasoning window, and is it measured from title recording?
- Are there prepayment charges that cut into the cash returned?
- Can the file be repriced after a renewal at market rent?
On parameters, most cash-out files in the network land at 75% LTV or below on standard rentals, with about 6 months of seasoning, credit commonly around 660 and a 620 floor in parts of the network. Reserves typically run around 6 months of PITIA and step up to about 9 months on loans above $1,500,000. Standard loan sizes reach $3,000,000. These are typical ranges, subject to lender guidelines, and every file is underwritten individually.
Misconceptions That Cost Investors
Myth: a higher lease boosts the loan. Under lower-of treatment, the excess is ignored.
Myth: there is one DSCR rule. Terms vary by lender, and exceptions are sometimes possible.
Myth: the 1007 is a DSCR rule. It is an appraisal form, the rent schedule, that non-QM lenders borrow for their DSCR programs.
Myth: DSCR means no documents. The file still needs an appraisal, lease and credit report. Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines.
Myth: cash-out always returns cash. Payoff, closing costs, reserves and any prepayment charge come out first.
Frequently Asked Questions
Does the lender count the lease or the appraisal when the lease is below market?
Most programs in the network count the lower of the two, so the below-market lease becomes the rent in the ratio. Some programs use the appraisal figure alone. The policy is set per lender, which is why matching the file to the program matters.
How much does a below-market lease shrink my cash-out?
No published figure exists, and the answer depends on the payment, taxes, insurance and dues. Rent discounts hit coverage harder than their size suggests because fixed costs do not fall with rent. Running the file at both rents shows the gap for your property.
Should I raise rent before refinancing?
Often a renewal at market, signed before the appraisal, helps more than rushing the loan. Local notice and rent-regulation rules vary, so confirm what applies to your property first.
What if my ratio lands under 1.00?
A smaller cash-out, more equity, or a select-lender path below 1.00 with adjusted leverage and terms may be reviewed. Whether any of them fits depends on credit, reserves and the property.
Can a short-term rental use nightly income?
Sometimes, but it depends on the program. Programs have their own STR rules, and nightly income is not simply taken at face value. The 1007 cannot estimate a nightly fee, so a program that accepts nightly income relies on hosting history instead. In the network, STR cash-out tops out at 70% LTV, with about 12 months of hosting history generally expected.
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. Call 828-256-2183 or request a quote.
A deeper walk-through of investment-property equity extraction lives in Lendmire’s guide to cash-out refinance on an investment property.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Scotsman Guide: Reach Real Estate Investors by Becoming an Expert in These Loans
2. Fannie Mae Selling Guide B4-1.2-01
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: Top Super Jumbo DSCR Cash-Out Refinance Providers in a Beach Resort Market · Top Portfolio DSCR Cash-Out Refinance Providers for a Foreign National Investor · Top Super Jumbo DSCR Cash-Out Refinance Providers to Finish a BRRRR Deal
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.