The Quick Read: Yes, often, because many short-term rental programs let the lender qualify the loan on the appraiser’s long-term market rent instead of on nightly-booking income, though the answer depends on the program’s income method and on whether short-term use is legal at the address. The long-term figure is usually the more conservative number, and it is the one that carries the file when short-term income cannot be proven.
- The fallback is a qualifying choice about which income figure goes into the ratio. It is not a promise that a long-term tenant will cover your costs.
- One-unit properties use the appraiser’s Form 1007 rent schedule. Two-to-four unit properties use Form 1025.
- Short-term rental purchases typically run up to 75% LTV, with a 1.00 coverage floor, subject to lender guidelines.
- If short-term use is not legal at the address, long-term rent may be the only income figure left.
- Clearing 1.00 is not the same as making money. DSCR compares rent to the monthly payment only.
Two different questions hide inside the title. One is about qualifying: which income number does the lender use to approve the loan? The other is about operating: can you rent to a long-term tenant later if bookings dry up? Most articles blur them. This one keeps them apart.
Key Terms Defined
DSCR (debt service coverage ratio): Monthly rent used for lender review divided by the monthly payment. It shows whether the property’s income covers its own debt.
PITIA: Principal, interest, taxes, insurance, and any HOA dues. It is the full monthly obligation the rent is measured against.
Qualifying basis: The income figure the lender drops into the ratio. For a short-term rental, it can be booking history, a projection, or long-term market rent.
Form 1007 / Form 1025: Appraisal exhibits that estimate monthly market rent. Fannie Mae’s forms list names the 1007 as the Single-Family Comparable Rent Schedule and the 1025 as the Small Residential Income Property Appraisal Report.
LTV (loan-to-value): The loan balance as a percentage of the property’s value.
Trailing history: Documented booking income over a past stretch, usually twelve months, from a platform or property manager statement.
How Do Lenders Pick the Income Basis?
Across the wholesale network Lendmire works with, a short-term rental file generally is reviewed on one of three income bases. Which one applies depends on the program and on whether you are buying or refinancing.
| Basis | What supports it | Typical use | Main risk |
|---|---|---|---|
| Booking history | Platform or manager statements, bank deposits | Refinances, owners with a track record | Income may be seasonal |
| Projection | Third-party market data, appraiser analysis | Purchases with no history | Estimate, not proof |
| Long-term market rent | Form 1007 or 1025 | Fallback, or the program’s chosen method | Often lowest figure |
Lendmire arranges these loans as a broker. It does not make the final call. The lender’s program sets the method, and the lender’s underwriter reviews the file. Some programs let you choose the stronger supported basis. Others fix the method, and a few default to the conservative number whenever the evidence is thin.
Short-term rental financing in the network typically runs up to 75% LTV on a purchase and about 70% on a refinance or cash-out, on short-term-rental collateral. Expect a 640 or better credit score and roughly 12 months of hosting experience. The coverage floor is 1.00 on a purchase and 1.00 on a refinance. All of it is subject to lender guidelines, and none of it is a commitment to lend. The complete DSCR loans guide covers the baseline mechanics.
When Does the Fallback Kick In?
The fallback applies in four situations, and each one works differently.
No history. A property you are buying has no booking record under your ownership. Programs that want proof of income may lean on a projection or on long-term rent. Programs that want hosting experience look at your record as an operator, not the property’s.
Thin history. A few strong months do not make a track record. If the statements cover a partial year, or one peak season carries the average, the lender may discount the figure or default to the appraiser’s rent.
An unsupported projection. A projection is only as good as its support. When comparables are thin or the number looks aggressive, the underwriter can set it aside.
Restricted or illegal use. This is the hard one. Lenders generally want evidence that short-term use is allowed at the address, including permits, zoning, and HOA or condo rules. A live listing is not proof. If the evidence is missing, short-term income may come out of the file entirely. 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.
Does the Lender Take the Better Number or the Lower One?
It depends on the program, and it is the question to ask before you write an offer. Where a program fixes its income method, you get that number whether or not it flatters the property. Where a program lets the file run on the stronger supported figure, you can present both bases and let the ratio decide.
A common pattern is conservative. When two estimates of rent exist, such as a lease and an appraisal, programs often use the lower one. So do not assume the fallback only ever helps you. Sometimes the long-term number is the cap, not the cushion.
Here is the practical move. Run two ratios before you commit. One uses supported short-term income. The other uses the long-term market rent. Divide each by the full monthly obligation and see which one clears the program’s floor.
What Does the Appraiser’s Rent Number Actually Measure?
The appraiser’s rent figure measures monthly lease rent. Nothing more.
Form 1007 is built around comparable lease rents, adjustments, and vacancy comments, ending in a monthly market rent conclusion, per the form itself. It has no place for nightly rates or seasonality. HousingWire published a piece by an appraisal-management executive arguing that the form was designed only for long-term rent, so using it on a short-term property produces an artificially low result. That is one industry viewpoint, but it matches how the form is built.
Appraiser views differ. An appraisal vendor, Class Valuation, takes the strongest position: the 1007 cannot support short-term income, and booking income belongs in a separate, labeled narrative analysis. The same firm says forms are changing, and that narrative addenda will stay essential as the UAD 3.6 transition retires legacy forms.
A contrast worth drawing: Fannie Mae’s Selling Guide describes the 1007 as an exhibit for one-unit investment properties. Those are agency rules. DSCR loans are not agency products, and agency rules do not govern how a non-QM lender counts short-term income. The forms are borrowed as appraisal formats, nothing more.
If the appraisal rent comes in weak, you have options:
- Ask whether the program accepts an appraiser’s short-term income analysis in place of the 1007.
- Supply comparable lease data that the appraiser may not have found.
- Check whether another income basis, such as trailing statements, is available on a refinance.
- Rework leverage so the file clears on the lower number.
Two misconceptions need burying. Nightly rate times 30 does not produce a monthly rent an appraiser can use. And the 1007 does not capture Airbnb income.
A Worked Example: Same Property, Two Bases
Run the numbers on a hypothetical two-bedroom vacation house, modeled for illustration only. Use a single monthly obligation for both tests.
| Test | Income basis | Coverage result |
|---|---|---|
| A | Supported short-term income | Clears about 1.25x |
| B | Appraiser’s long-term rent | Lands near 0.95x |
On Test A the file clears the 1.00 floor with room to spare. On Test B it falls just short. Same house, same payment, different answer.
What happens next depends on the lender. If the program counts the short-term basis and the evidence holds, the file works as submitted. If the program falls back to long-term rent, coverage below 1.00 is not necessarily a dead end. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. Other fixes include a larger down payment to lower the monthly obligation, a smaller loan, or waiting until trailing history exists.
A larger down payment can lift the ratio, but it never erases credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
The Two Meanings of Fall Back
The operating side is different.
Suppose the loan was approved on short-term income, and bookings later soften. Can you switch to a long-term tenant? Physically, yes. But three loan-side questions come first:
1. Does the loan document restrict use? Read it for occupancy or use terms before you sign a long-term lease.
2. Does insurance change? Short-term and long-term policies cover different risks. A policy written for nightly guests may not fit a twelve-month lease.
3. Does the lender need to know? Ask your servicer what notice, if any, applies.
The operational shift also costs money and time. Furniture comes out or stays, a lease gets written, a tenant is screened, and there is usually a vacancy gap. Some owners test a middle path, a medium-term stay of a few months, before committing to a full lease. Check that your insurance and local rules allow it.
The loan keeps its original qualifying basis. A later switch does not retroactively change how the file was approved. It changes whether the property’s actual income covers its actual costs.
What If Long-Term Rent Doesn’t Cover the Payment?
Then the property is carrying a gap, and you fund it from reserves or other income. Reserves vary by lender, leverage, loan size, and transaction type. Many files expect around 6 months of PITIA, and larger loans step up. Treat the long-term number as your floor for planning, not your ceiling.
Remember what DSCR leaves out. It compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex all sit outside the ratio. A deal can clear 1.00 and still lose money each month. It can also fall below 1.00 on long-term rent and still make sense on a seasonal strategy, if the short-term income is real and legal.
Decision Framework: Which Basis Fits Your Situation?
| Your situation | Likely best path |
|---|---|
| Documented 12 months of hosting income | Short-term basis, if the program allows |
| New purchase, no history | Compare projection against long-term rent |
| Short-term legality unclear | Underwrite on long-term rent |
| Thin or seasonal booking record | Consider waiting, then refinance |
| Long-term rent clears the floor alone | Cleanest file, least dependence on bookings |
A practitioner pattern worth knowing: files in heavily seasonal markets often look fine on one strong summer and weak on the rest of the year. Underwriters notice. The cleaner approach is to prepare both ratios up front and know which one the lender will use before you make an offer.
Buyers often ask whether to wait for history or use the fallback now. A fallback gives you a safety net in underwriting. If long-term rent clears the floor on its own, you can buy today and refinance later once bookings are documented. If it does not, you are depending on the short-term basis, and the lender will want proof. Plan your equity and reserves around the more conservative figure either way.
Documents Checklist by Basis
- Booking history: twelve months of platform or manager statements, and bank deposits that match them.
- Projection: a third-party market analysis, or an appraiser’s short-term income analysis, depending on program.
- Long-term rent: the appraisal rent schedule, and a signed lease where one exists.
- Legality: permits, zoning verification, and HOA or condo documents.
- Borrower: credit report, entity documents where applicable (subject to lender program eligibility), and proof of reserves.
Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Can the lender force the long-term rent number on me?
Yes, when the program’s income method is long-term rent or when short-term income cannot be supported. Some programs let you present the stronger supported basis. Ask which applies before you make an offer.
Does a fallback mean the loan gets denied?
No. It means a more conservative coverage figure. The loan may still work at a lower amount, with different leverage, or with more cash down, subject to lender guidelines and credit approval.
Does the 1007 count my Airbnb income?
Not by design. The form estimates monthly lease rent from comparable rentals and has no field for nightly pricing. Programs that count short-term income use another source, such as statements or a separate analysis.
What if short-term rentals are banned at the property?
Then short-term income generally cannot be used, and the file is reviewed on long-term rent or does not qualify. A live listing is not proof of legality, so confirm the rules with the city, county, and any HOA before you rely on booking income.
Can I switch to a long-term tenant after closing?
Often yes, but check your loan documents for use terms, update your insurance, and ask whether your servicer needs notice. The loan keeps the basis it was approved on.
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. For a related read on structuring the fallback at purchase, see Lendmire’s guide How to Buy a Short-Term Rental With a Long-Term Rent Fallback, and for a deeper look at sizing, see Lendmire’s piece Does a Larger Short-Term Rental Have to Qualify on Long-Term Rent?.
Most short-term rental files turn on one decision made before the offer: know which rent number the lender will count, and size your equity around the lower one.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae – Selling & Servicing Guide Forms
3. HousingWire – Short-term rentals are breaking the appraisal playbook
4. Class Valuation – Appraisal Form 1007 and short-term rentals
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: STR Projection vs Long-Term Rent Fallback on a Condotel DSCR Loan · Can You Get a Short-Term Rental Loan in an HOA That Limits Rentals? · How to Qualify for a No-Ratio DSCR Loan on Short-Term Rental Properties
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.