The Quick Read: The lender qualifies the property, not your paycheck. It takes your documented rental income, trims it for the swings short-term income carries, divides it by the full new monthly obligation, and then caps the loan at a maximum share of the appraised value. Two tests decide your cash-out amount, and whichever one binds first sets the loan.
- On a short-term-rental cash-out, the network of wholesale DSCR lenders Lendmire works with typically tops out around 70% LTV, a lower cap than the 75% common on standard long-term rentals.
- The coverage floor on these refinances is 1.00, tested against the new, larger payment.
- Expect a 640+ credit score and about 12 months of hosting history on most files.
- Documented platform payouts that tie to bank deposits carry the most weight.
- Passing the coverage test is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the ratio.
Program figures here are typical ranges, subject to lender guidelines, and are not a commitment to lend.
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 Oct 29, 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 Oct 29, 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.
What Is Being Underwritten, Exactly?
A DSCR loan is a debt service coverage ratio loan. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Your W-2s and debt-to-income ratio are not the center of the file.
That makes the property the borrower, in a sense. The lender asks whether the income the house produces can carry the debt placed on it.
A short-term rental is different from a lease because nobody signed a twelve-month promise. Income rises and falls with seasons, pricing, reviews, and local demand. Lenders respond to that variability in three ways: they demand more evidence, they discount the income, and they cap leverage lower than on a standard rental. That is why the STR cash-out ceiling sits around 70% LTV. 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. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
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 Do Lenders Decide Which Income Counts?
The income figure comes from one of three sources, and the source changes with your situation. On a refinance of a property you already operate as an STR, your actual history is usually the strongest evidence. Projections matter more on purchases.
| Evidence path | When it applies | Main risk |
|---|---|---|
| Trailing platform history | Operating STR with a track record | Weak months drag the average |
| Third-party market projection | Purchases, short history | Overstated forecasts |
| Appraiser long-term market rent | Fallback or no STR history | Understates STR income |
Many lenders do not write STR loans at all and limit themselves to long-term rentals. Among those that do, treatment differs. One program may accept twelve months of documented earnings. Another may want the appraiser’s STR analysis alongside it. A third may use the lower of two figures. A broker that sees many programs can match your evidence to the lender whose method suits it, and that matching often moves the loan amount more than anything else.
If you converted a long-term rental to an STR recently, usually only the months you operated it as an STR count. The lender may blend in market rent or fall back to it entirely. Programs for this product typically expect about 12 months of hosting experience, so a short history narrows your options.
How Does the Haircut Work?
Lenders commonly discount gross short-term income before testing coverage. Think of it as a built-in cushion for vacancy, platform fees, cleaning, and slow months. The size of that discount varies by program. Some lenders apply a fixed percentage. Experienced hosts with clean history may see a lighter treatment.
Here is the practical point: gross revenue overstates what the lender will credit. Model your file twice before you apply, once with a trimmed income figure and once with long-term market rent.
What Documents Make the File Clean?
Clean documentation keeps income from being thrown out. A typical package includes:
- Platform earnings exports for the full trailing period.
- Property manager statements, if one runs the unit.
- Bank statements where deposits reconcile to the payouts.
- Proof of separation if the same account receives income from other properties.
- Evidence that short-term use is allowed, such as permits, registration, or HOA documents.
- Insurance that fits short-term use.
Deposits that do not match payouts cause more trouble than a modest income number. If a manager nets out fees before paying you, say so up front and show both gross and net.
Where Does the Appraisal Fit?
The appraisal sets value, and value drives the LTV test. It also supplies a rent schedule. For a one-unit property that is Form 1007, and for two to four units it is Form 1025.
Here is where owners get surprised. Fannie Mae’s appraiser guidance describes Form 1007 as a monthly-rent form, supported by monthly-lease comparables, and says it cannot estimate a nightly fee. McKissock makes the same point: the form documents monthly rent, not nightly or business income. Class Valuation adds that STR income is business-driven and calls for a projected-income analysis built on STR comparables.
The takeaway is simple. A 1007 rent figure often sits well below what a busy STR actually earns. If a lender leans on it, the coverage ratio will look weaker than your real results. That is one reason actual platform history matters so much on a refinance.
How Is the Cash-Out Amount Sized?
Two tests apply at once, and the smaller answer wins.
1. The equity test. Appraised value times the LTV cap. On short-term-rental collateral, the cash-out cap runs around 70% on the programs in the network.
2. The coverage test. Credited income divided by the new payment must clear the floor, which is 1.00 on a refinance here.
Cash to you is the new loan minus the payoff of your old loan, closing costs, and any holdbacks. Closing costs can be rolled into the loan on some files.
The payment in the coverage test is the new one. Pulling out cash makes the loan bigger, which makes the payment bigger, which pushes the ratio down. So a property that covered its old payment comfortably can hit the coverage ceiling before it hits the equity ceiling.
A Worked Example (Modeled Numbers, Not Market Data)
Run the numbers on a modeled property, with every input an assumption chosen for illustration.
Assume the appraised value is 100 units. Gross trailing STR income is 100 units a year, and the lender trims it by 20%, leaving 80 credited. Say the existing loan payoff equals 45% of value.
Scenario one: equity binds. At the 70% cash-out cap, the new loan is 70% of value. Assume the new full payment (principal, interest, taxes, insurance, and HOA) comes to 70 units a year on that loan. Coverage is 80 divided by 70, about 1.14x. That clears 1.00, so the 70% LTV cap sets the loan. Gross proceeds are 70% of value minus the 45% payoff, or 25% of value, before closing costs and holdbacks. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Scenario two: coverage binds. Now assume taxes and insurance are heavier, so the same 70% loan carries a payment of 85 units. Coverage is 80 divided by 85, about 0.94x. At full leverage, that sits below 1.00.
A lender would review several paths here:
- Shrink the loan until coverage reaches 1.00. In this model that is a loan near 66% of value, so proceeds fall to roughly 21% of value before costs.
- Use an interest-only period or an extended 40-year term, both available through select lenders in the network.
- Use a separate select-lender path that takes coverage below 1.00 with leverage and terms adjusted.
- Show stronger documented income.
Qualification is always subject to lender guidelines, credit review, and property review. The broader mechanics live in Lendmire’s complete DSCR loans guide.
Does Passing the Ratio Mean the Property Makes Money?
No. Clearing 1.00 means rent covers the payment. Nothing more.
The ratio compares income to PITIA: principal, interest, taxes, insurance, and association dues. It leaves out repairs, vacancy, platform and management fees, utilities, supplies, furnishing replacement, and capital expenses. Short-term rentals carry heavier operating costs than long-term rentals, so the gap between lender coverage and true cash flow is wider on STRs.
| Counted in the ratio | Left out of the ratio |
|---|---|
| Principal and interest | Cleaning and turnover |
| Property taxes | Management and platform fees |
| Homeowners insurance | Utilities and supplies |
| HOA dues | Repairs and capex |
Here is a useful stress test. Take your true operating costs, subtract them from your gross income, and divide what is left by the proposed payment. If that number sits near or below 1.00, the loan may qualify while the property barely carries itself. Lenders will not run that test for you. Run it yourself.
Why Does Seasonality Change the Picture?
A trailing average blends your peak and your trough. A beach cabin that earns most of its year in one season can look thin on a twelve-month average, even though the peak months cover the payment many times over.
Filing timing matters too. Applying right after a slow stretch pulls the trailing figure down. Applying after a strong season can lift it. Break your own income out month by month so you can see the coverage ratio by season, and so you can explain the pattern before the lender asks.
What Does Experience Across Many Files Show?
On STR cash-out files, the income number gets argued about, but the payment denominator causes more surprises. Owners compare the new payment to the old one, and the old one is the wrong benchmark. Files that pencil on the old payment often slip once the cash-out lifts the balance and taxes and insurance get refreshed. The strongest files run coverage on the new payment before anyone orders an appraisal.
Why Do Files Get Reduced or Declined?
Common reasons include:
- Gross income that does not reconcile to bank deposits.
- Income from other properties mixed into the same account.
- Short hosting history under the program’s expectation.
- A credit score under the program floor (640 on most STR programs, with stronger tiers higher).
- Coverage below the floor at the requested loan size.
- Property types the network does not offer, such as manufactured homes, log homes, and barndominiums.
- Reserves short of the program’s requirement. Reserves vary by lender, leverage, loan size, and transaction type, and a common level is around six months of PITIA.
Seasoning is the waiting period after you acquire a property before you can refinance it. About six months is the common expectation across the network, though it varies by program.
A larger equity cushion lowers the loan size and can lift coverage. It does not erase leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Your Pre-Application Self-Check
1. Pull twelve months of platform statements and tie each payout to a bank deposit.
2. Separate this property’s income from every other property’s.
3. Model coverage twice, once on trimmed STR income and once on long-term market rent.
4. Test it on the new, larger payment, not the old one.
5. Confirm your score meets the program floor and your hosting history is long enough.
6. Check that permits, HOA documents, and insurance match short-term use.
7. Price the net proceeds after costs and holdbacks, not the gross loan.
8. Run your own cash-flow stress test, including every cost the ratio ignores.
Loan size generally runs up to $3,000,000 on standard programs, and above $2,500,000 the network generally holds to 30-year fixed structures. Programs change and every file is underwritten individually.
Key Terms Defined
DSCR: Debt service coverage ratio, the credited rental income divided by the full monthly obligation on the loan.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly cost of owning the property.
LTV: Loan-to-value, the loan balance as a percentage of the appraised value.
Trailing history: The past twelve months or so of actual booking income, taken from platform and bank records.
Haircut: The discount a lender applies to gross short-term income before testing coverage.
Seasoning: The waiting period between acquiring a property and refinancing it.
Reserves: Liquid funds, usually counted in months of PITIA, that you hold after closing.
Form 1007 and Form 1025: The appraiser’s rent schedule for one-unit properties and the operating income statement for two to four units.
Frequently Asked Questions
Do lenders count gross Airbnb or Vrbo revenue as income?
Usually not in full. Lenders commonly discount gross short-term income before testing coverage, and the discount varies by program. Model your file on a trimmed figure, not the headline revenue number.
Does the appraisal capture my short-term rental income?
Not by itself. The standard rent schedule form measures monthly rent, so it can understate a busy STR. Programs that use actual platform history or an STR projected-income analysis give a fuller picture of the property.
Will a cash-out refinance hurt my coverage ratio?
Often, yes. Cash-out raises the loan balance, so the payment in the denominator grows. Test coverage on the new payment before you decide how much to pull out. If coverage binds before the 70% STR cap does, the loan shrinks.
Can I qualify with a ratio below 1.00?
Possibly. Coverage at 1.00 is where many select programs start for this product. A separate path through select lenders in the network takes coverage below 1.00, with leverage and terms adjusted. Eligibility depends on credit, reserves, property review, and lender guidelines.
How do I find the right program for my property?
The right program depends on your income evidence, credit profile, leverage need, and property type. Lendmire is a broker that shops multiple wholesale lenders and matches the scenario to the program, and compensation for the broker is paid by the lender or the borrower. Comparing the full terms side by side is the sound way to choose.
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. The brokerage arranges DSCR financing through select lenders across 41 markets, including Washington, D.C. Lendmire can also walk you through program specifics for DSCR refinancing on short-term rentals. You can also call 828-256-2183.
A short-term rental that clears the lender’s math has passed one test. Whether it earns its keep after every real expense is the number you should check yourself.
Investors weighing their equity options can start with Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus 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.
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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
1. Fannie Mae – Appraiser Update
2. McKissock – Form 1007 and STR Appraisals
3. Class Valuation – Form 1007 and Short-Term Rentals
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: How to Plan and Use a Short-Term Rental Cash-Out Refinance to Recover Your Investment · How Lenders Underwrite a DSCR Cash-Out Refinance Without Disrupting Rental Income · How Lenders Underwrite a Short-Term Rental Cash-Out Refinance With a Low Appraisal
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.