The Quick Read: A DSCR HELOC is a revolving line of credit on a non-owner-occupied rental, written as a second lien behind the first mortgage you keep or as a first lien on a paid-off rental, and qualified on the property’s rent instead of your personal income, with a Form 1007 rent schedule appraisal setting the market rent. The line qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The appraiser’s rent opinion is half of the coverage test.
- The coverage test needs gross monthly rent to reach at least 1.10x a stress payment on the entire credit limit.
- Rent is the lesser of the 1007 market rent and the lease, unless three months of receipts support a lease above market.
- Second liens reach 70% CLTV at a 720 score or better, on lines of $50,000 to $500,000, subject to underwriting.
- The program is offered in all 16 of Lendmire’s licensed states.
What Does a DSCR HELOC Actually Do?
It lets you pull equity from a rental without touching the first mortgage you already have. The line sits behind that loan as a standalone second lien. If the rental has no mortgage, the line can be a standalone first lien instead.
Qualification runs on the property. The lender looks at the rent, the lease, your credit report and the valuation. It does not look at tax returns, W-2s, pay stubs or a debt-to-income ratio. The rent has to carry the line, and that is where the rent schedule comes in.
DSCR stands for debt service coverage ratio. You divide gross monthly rent by the monthly payment the lender tests. A result of 1.10x means rent runs 10% above that payment.
The line is a business-purpose loan on an investment property. It is never offered on your own home or a second home. Vesting in an LLC is allowed, subject to program terms. The LLC’s members sign as guarantors, and the borrowers on the line do not have to match the borrowers on the first mortgage.
This structure suits an owner who wants to keep the first mortgage in place and still reach the equity in the rental. For the full framework behind this kind of lending, see Lendmire’s complete DSCR loans guide.
What Is a 1007 Rent Schedule?
A 1007 rent schedule is a short appraiser’s report that gives an opinion of monthly market rent. Freddie Mac’s copy of the form shows one document under two numbers: Freddie Mac Form 1000 and Fannie Mae Form 1007, the Single-Family Comparable Rent Schedule. Lenders use it to get a market rent figure from the appraiser. The appraiser attaches it to the appraisal.
McKissock, an appraiser-education provider, says the form covers one-unit single-family homes and condominiums. The appraiser collects data from comparable one-unit rentals and documents an estimated monthly rent.
The appraiser looks at what similar homes nearby actually rent for. Size, condition, bedroom count and location all drive the adjustments. The result is a market rent number, not an income number. Deciding what income counts is the lender’s job.
Two to four units work differently. They use Form 1025, which builds the rent analysis into the report unit by unit. Condos take Form 1073 for the full appraisal. Single-family and townhome files take Form 1004.
DSCR lenders borrow these forms as a standard way to document rent. Only the forms come over. They are appraisal formats, and the conventional loan rules that created them do not govern this line.
How Does the Rent Schedule Feed the Coverage Test?
The 1007 sets the market side of the rent, and the lease sets the other side. Rent is the lesser of the appraisal’s market rent and the lease, unless three months of receipts support a lease above market. A lease must be in place either way.
Think of the 1007 as a second opinion on your lease. If you rent far above what the neighborhood supports, the lender wants proof the tenant really pays it. Three months of receipts is that proof.
The test then divides that rent by the qualifying payment. Here is how the payment is built:
- It is a fully amortizing payment, meaning principal and interest.
- It is calculated on the entire credit limit, not the drawn balance.
- It uses the start rate plus 2 percentage points, which is why it is called a stress payment.
- Taxes and insurance are not part of it.
That full-limit rule surprises people. Draw only part of the line and the test still assumes the whole limit is borrowed. Your rent has to carry the line you are approved for.
On a second lien, confirm on the file how the lender treats the first-mortgage payment. The lender’s own coverage calculation governs, and the arithmetic here is illustrative only.
Run the numbers this way. Say a lease and a 1007 agree, and rent covers the stress payment at about 1.25x. That clears the 1.10x floor with cushion. Now say the lease is well above market and no receipts back it. The 1007 figure becomes the rent, and coverage might drop to roughly 1.05x. That misses the floor.
In that case the borrower can ask for a smaller line, since a smaller limit means a smaller stress payment. Whether any structure works depends on lender review.
What Are the Leverage Tiers and Line Terms?
Second liens reach 70% combined loan-to-value (CLTV) at a 720 credit score or better, on lines of $50,000 to $500,000. CLTV means the first mortgage balance plus the new line, divided by property value. First liens on a paid-off rental reach 75% LTV at 740 or better, and 70% from 700 to 739, on lines up to $500,000. Above that, lines run to $1,000,000 at 65% LTV and a 720 score or better. All figures are ceilings, through select programs and subject to underwriting. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Here is the same picture at a glance:
| Lien position | Score | Ceiling | Line size |
|---|---|---|---|
| Second lien | 720+ | 70% CLTV | $50,000-$500,000 |
| First lien | 740+ | 75% LTV | Up to $500,000 |
| First lien | 700-739 | 70% LTV | Up to $500,000 |
| First lien, large line | 720+ | 65% LTV | To $1,000,000 |
A declining-market flag can lower the ceiling by 5 points. Philadelphia lines carry a ceiling 10 points lower.
The line itself works like this:
- Draw period: 5 years, interest-only on the drawn balance.
- Repayment period: 25 years, fully amortizing, for a 30-year maturity.
- Rate: variable. The pricing terms come with the lender’s HELOC disclosures.
- Closing draw: at least 80% of the line is drawn at closing, and never less than $50,000. On the smallest lines, that means the whole line.
- Later draws: at least $5,000 each.
This is not a quiet backup line. You draw most of it on day one and pay interest on it. Size the line to the use you have.
The credit floor is 720 on a second lien and 700 on a first lien, measured on the lender’s own report. The mortgage history needs no 30-day late in the last 12 months. It also needs 48 months since a bankruptcy, foreclosure, short sale or deed-in-lieu. No reserves or cash to close are required. Each borrower is limited to 5 loans or $2,500,000 with the program.
What Does the Valuation Path Look Like?
Lines up to $400,000 can use an automated valuation with a confidence score of 85 or better, plus a property inspection report. A full interior appraisal is the other option. Lines above $400,000 need a full interior appraisal. Appraisal waivers are not accepted.
Notice what that says. DSCR means no personal income calculation. It does not mean no appraisal.
Comp quality behind the rent schedule is the biggest swing factor in the file. Weak comps can produce a rent opinion below your lease. A low rent opinion can shrink the usable line, change the pricing or stall the file.
Title work depends on lien position. A first lien and any second lien above $400,000 take a full title policy. Smaller second liens take an owner-and-encumbrance report.
Which Properties Fit and Which Don’t?
Eligible properties include single-family homes, PUDs, townhomes, two-to-four unit buildings, and warrantable and non-warrantable condos. Lots up to 10 acres also qualify. The leverage tiers above apply to every property type.
These are outside the program:
- Rural-designated property
- Row homes
- Condotels
- Commercial, agricultural and mixed-use property
- Leaseholds and land trusts
- Age-restricted communities and hobby farms
- Modular and log homes
- Land contracts
- A property listed for sale in the prior 2 months
- A property with a solar lien
A two-to-four unit property can have at most one vacant unit. A lease must be in place on a vacant-then-leased rental. A vacant rent-ready property with no lease is not eligible until it is leased. A new build has no lease history, so the 1007 supplies the market side, but a lease is still required.
Foreign nationals and ITIN borrowers are not eligible. U.S. citizens, permanent residents and non-permanent residents with a Social Security number can apply.
Does Seasoning Apply?
A rental bought or refinanced inside the last 6 months is not eligible (that clock runs from the last note date to the new note date), and the owner must have held title for 6 months (settlement date to note date). A recent BRRRR refinance can therefore sit out of this program for a while.
What About Short-Term Rentals?
A nightly-booking property is a poor fit for the 1007. Fannie Mae’s Appraiser Update says the form was not designed for appraising single-family properties used as short-term rentals. It also says it would be incorrect to use nightly comparables and multiply the fee by 30.
So a nightly-booking property typically gets a monthly-lease rent opinion, and a pure nightly rental may not fit this line. 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.
How Does It Compare With the Alternatives?
| Factor | DSCR HELOC | DSCR cash-out refinance | Income-qualified bank HELOC |
|---|---|---|---|
| Reviewed on | Rent | Rent | Personal income |
| First mortgage | Stays in place | Replaced | Stays in place |
| Funds | Revolving line | One lump sum | Depends on lender |
| Rent evidence | 1007 plus lease | Appraisal rent plus lease | Usually none |
The refinance path makes sense when you want one new loan and the old first mortgage is not worth keeping. The line makes sense when your first mortgage is better than anything you could replace it with. Lendmire lays out that tradeoff in its page on cash-out refinancing a rental.
Also ask which structure is being offered. Some products sold as a DSCR HELOC are closed-end second loans, a HELOAN, which cannot be redrawn. This program is a revolving line.
When Does It Not Fit?
It does not fit if your rent is thin against the full limit. It does not fit if your score is under the floor for your lien position. A borrower who keeps a first mortgage can only take a second lien, which needs a 720 score. It does not fit if the property is on the excluded list.
It also carries real risk. The rate is variable. The line is a lien on your rental. The 5-year interest-only period ends, and then the 25-year repayment period begins at a higher payment on the same balance.
A line that is too big for the rent will fail the coverage test, because the stress payment is figured on the entire limit. A smaller line often clears the test more easily. The point is to match the line to the rent, not to chase the maximum.
Key Terms Defined
DSCR: gross monthly rent divided by the monthly payment the lender tests.
HELOC: a home equity line of credit, a revolving line secured by property you own.
Form 1007: the appraiser’s comparable rent schedule for one-unit rentals, which documents estimated monthly market rent.
Form 1025: the appraisal report for two-to-four unit properties, which analyzes income unit by unit.
Stress payment: the fully amortizing payment on the whole credit limit at the start rate plus 2 percentage points, used only for qualifying.
CLTV: the first mortgage balance plus the new line, divided by property value.
Second lien: a loan that sits behind the first mortgage and is paid after it if the property is sold.
Seasoning: the waiting period a lender wants after you buy or refinance a property.
Frequently Asked Questions
How long must I own a rental before I can get a DSCR HELOC?
Two six-month clocks apply: the line is not available on a rental bought or refinanced in the last 6 months (last note date to new note date), and title must have been held for 6 months (settlement date to note date). Both are checked at underwriting, so a recent purchase or cash-out refinance can push you past the window.
Can a short-term rental qualify?
A nightly-booking property may not fit this line. The 1007 documents monthly lease rent, not nightly income, and the form was not built for nightly-booking properties. A property rented on monthly leases is the cleaner fit, subject to lender review.
What if my lease is higher than the 1007 figure?
The lower of the two is typically used. The exception is three months of rent receipts that support the higher lease. Without receipts, the market rent controls the coverage test. A low rent opinion can reduce the usable line.
Is every product called a DSCR HELOC a revolving line?
No. Some are closed-end seconds that cannot be redrawn. Ask which structure is being offered, how the draw period works and how the first-mortgage payment is treated in the coverage test.
Do I need an appraisal?
Yes. Lines up to $400,000 may use an automated valuation with a property inspection report, or a full interior appraisal. Larger lines need a full interior appraisal, and waivers are not accepted.
If you are considering a home equity line on a rental property and want to see how the numbers work, Lendmire can help you compare DSCR HELOC options based on the property, the rent, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183 or request a quote. Lendmire is a broker and places these files through a wholesale lender. This is not a commitment to lend.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps landlords and real estate investors open DSCR home equity lines of credit on their rentals — lines qualified on the property’s rent, never on the owner’s own home — through wholesale lenders in 15 of Lendmire’s 16 licensed states (every licensed state except Tennessee). Lendmire is never the lender; line amounts, ceilings and terms are set by the lender under its guidelines. 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
2. McKissock
3. Fannie Mae Appraiser Update
This article is part of Lendmire’s DSCR HELOC program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best DSCR HELOC Program on an Airbnb Investment Property · Top DSCR HELOC Providers When You Are Not on the Existing Mortgage · Top DSCR HELOC Providers for Business Owners With Rentals
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.