The Quick Read: On a DSCR refinance, the lender counts one rent figure: usually the lower of the signed lease or the appraiser’s market-rent opinion, and some programs use market rent alone. That figure is divided by the full monthly obligation on the new loan, which covers principal, interest, taxes, insurance, and any association dues.
- Rent is checked against the new, larger payment on a cash-out, not the old one.
- A lease above market adds nothing in a lower-of program. A lease below market can cap coverage.
- A vacant property is tested on market rent alone.
- Clearing 1.00x is a lender test, not proof of positive cash flow.
- Sub-1.00 paths exist through select lenders, with leverage and terms adjusted.
No federal rule sets this. DSCR loans are designed for non-owner-occupied investment properties, and because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. Every file is underwritten individually, subject to lender guidelines.
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What Does “Counting Rent” Actually Mean?
Counting rent means choosing one monthly rent number to test against the loan payment. That number is not always what the tenant pays. It is the figure the lender is willing to rely on.
Think of two separate numbers. The first is your collected rent. The second is the rent the underwriter counts. They often match. When they don’t, the counted number wins.
The test itself is simple. Divide the counted rent by the full monthly obligation on the new loan. Industry explanations of residential investor loans vary in wording, but the shape is the same: rent on top, housing payment on the bottom. Operating costs such as repairs, vacancy, and management are not deducted. That separates this ratio from the net-operating-income metric used in commercial lending. Do not blend the two definitions.
Key Terms Defined
Counted rent: The single monthly rent figure the lender uses in the ratio, which may differ from what the tenant pays.
PITIA: Principal, interest, taxes, insurance, and association dues, the full monthly obligation on the loan.
DSCR (debt service coverage ratio): Counted rent divided by PITIA. A result of 1.00x means rent equals the payment.
Market rent: The appraiser’s opinion of what the unit would rent for today, based on comparable rentals.
Rent schedule: The appraisal attachment that documents that opinion. The form for a single-family property is Form 1007.
Seasoning: The minimum time you have owned the property before a cash-out is eligible. About six months is the common expectation in the network.
Where Does the Rent Number Come From?
The rent number comes from two places: your lease and the appraiser’s rent schedule. The appraisal returns two outputs. Value drives the loan-to-value test. Market rent drives coverage.
The appraiser identifies comparable rentals, adjusts for size, condition, bedrooms, and location, and reaches a market-rent opinion. For a single-family rental, the document is Form 1007. For a two-to-four-unit building, it is Form 1025, which reports rent per unit. Fannie Mae’s forms list names both.
A quick contrast helps. Fannie Mae’s Selling Guide requires Form 1007 for a one-unit investment property when the borrower uses rental income to qualify. DSCR loans are not sold to the agencies, so agency rules do not govern them. The industry simply borrowed a form that documents rent cleanly.
How Underwriting Treats Rent, Step by Step
Underwriting follows a repeatable sequence. Across most programs we place files with, it runs like this:
1. Property check. The property must be a non-owner-occupied rental of an eligible type.
2. Documents. The file typically holds the executed lease and proof the tenant pays.
3. Appraisal. The appraiser returns value and a market-rent opinion.
4. Rent selection. On a tenant-occupied cash-out, the counted rent is usually the lower of the signed lease or market rent. Some programs use market rent alone.
5. Payment side. The counted rent is divided by the full PITIA of the new loan.
6. Outcome. Coverage and leverage together set eligibility and the pricing tier.
Step five matters most on a cash-out. A bigger balance means a bigger payment, so coverage is tested against the larger number. Many investors model the old payment by mistake.
The network’s typical figures give context. Cash-out refinances top out around 75% LTV on standard rentals, with about six months of seasoning. Coverage of 1.00x is where select programs start, and stronger ratios open better pricing and leverage. Most programs want a credit score near 660, a 620 floor exists in parts of the network, and 700+ unlocks the strongest tiers. Reserves commonly run about six months of PITIA, stepping up to about nine months on loans above $1,500,000. These are typical ranges, subject to lender guidelines. Our complete DSCR loans guide covers the full program picture.
Which Rent Wins: Lease or Market?
Usually the lower one. Think of the lease as a ceiling in many programs, not a floor.
| Situation | Typical counted rent |
|---|---|
| Lease at market | Lease and market agree |
| Lease above market | Market rent (lower-of) |
| Lease below market | Lease, which can cap coverage |
| Vacant property | Market rent alone |
| Month-to-month or expired lease | Usually a weaker file, not a blocked one |
Programs differ here, so treat the table as the common pattern, not a universal rule. Lendmire’s piece Refinancing a Rental Property With a Below-Market Lease: How the Market Rent Analysis Is Used goes deeper on the below-market case.
Worked Example: One Property, Two Rent Stories
Run the numbers on a tenant-occupied rental where the lease is strong. Suppose the appraiser’s market rent comes in about 12% below the lease. The ratio can drop from roughly 1.25x toward 1.10x, using illustrative figures only.
That is a real consequence. To restore the target coverage, the usual lever is a smaller loan, which means less cash out. The lease did not fail. The program simply counted a different number.
Now flip it. Say the lease is below market because of a friendly legacy arrangement. Coverage stays capped for as long as that lease runs. Renewing at a supportable market rent before the appraisal avoids showing the underwriter two rent stories.
Where the General Rule Breaks
The lower-of rule is a pattern, not a law. These edge cases bend it.
Vacant or mid-rehab property. There is no lease to compare, so market rent alone counts. A vacant file is not automatically weaker. Strong market rent can match a leased file.
Two-to-four-unit buildings. The appraisal reports rent per unit. How a program nets above-market and below-market units against each other can differ, so confirm it program by program.
Short-term rentals. Form 1007 estimates monthly market rent, not nightly revenue. Programs usually use another income method, such as booking history, and may fall back to the monthly-rent figure when history is thin. Never multiply a nightly rate by 30. Network STR programs typically allow purchase to 75% LTV, refinance around 70%, and cash-out at 70%, with about 12 months of hosting history and a 640+ score. Coverage floors are 1.00x on purchases and 1.00x on refinances.
Interest-only structures. Some programs divide by interest, taxes, and insurance rather than the full payment. That is program-specific, so confirm it before modeling.
Below-1.00 coverage. This is a separate path from the 1.00x programs. It is available through select lenders in the network, with leverage and terms adjusted. A no-ratio structure is available only through select lenders, generally for borrowers who already own a primary residence.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in these programs.
Coverage Is Not Cash Flow
Clearing 1.00x does not mean the property makes money. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it.
Treat the lender’s number as an eligibility test. Run your own operating budget as a separate exercise. A property can clear coverage and still drain your account.
What the Investor Decision Looks Like
Practical moves, in order:
- Model on market rent, not on what you collect.
- Pull your own rental comps before the appraisal is ordered.
- Renew a below-market lease at a supportable rent first.
- Pair rent coverage with leverage. A larger down payment on a purchase lowers the payment and can lift coverage, but it never erases credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
- If coverage falls short, compare a smaller loan, a lease renewal, or a different program.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Common Misconceptions
My signed lease is my rent used for lender review. Often it is the ceiling. Sometimes market rent replaces it.
A higher lease helps. Not in a lower-of program.
A long tenancy drives lender review. Tenure shows stability. The rent figure and proof of payment are what get underwritten.
Asking rents count. Listing screenshots do not override the appraiser’s figure.
Form 1007 is a DSCR form. It is an agency form that DSCR programs borrowed.
Frequently Asked Questions
Does the lender use my lease or the appraisal rent?
Usually the lower of the two on a tenant-occupied cash-out, though some programs use market rent alone. Check which convention your lender follows before you model proceeds.
What rent counts if the property is vacant?
Market rent from the appraisal counts, since there is no lease to compare. A vacant file can match a leased one when market rent is strong.
Is the new payment or the old payment tested?
The new one. A cash-out raises the balance, which raises the payment and lowers coverage, so size the loan with that in mind.
Can short-term rental income count?
Yes, through select programs, which typically look at booking history rather than a nightly rate multiplied out. When history is thin, the monthly market-rent figure may be used instead.
Does 1.00x mean the property cash flows?
No. The ratio ignores repairs, vacancy, management, and capex, so it measures loan coverage, not profit.
Next Step
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. Reach the team at 828-256-2183 or request a quote.
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. Fannie Mae: Selling Servicing Guide Forms
2. Fannie Mae Selling Guide B4-1.2-01
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a First Rental’s Cash-Out Refinance Releases for Reserves · DSCR Refinance Loans for Landlords Weighing a Rental Refinance · Can a VA Cash-Out Refinance Fund a Rental Down Payment?
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.