The Quick Read: Yes, a low 1007 can shrink or stall a DSCR cash-out refinance, because the rent opinion on that form sets the top half of the coverage ratio, though it more often resizes the loan than ends the file. When the appraiser’s market rent lands under what you modeled, coverage drops, and the usual fix is a smaller draw, a different program path, or a documented challenge to the rent figure.
- The appraisal returns two numbers: value (which drives leverage) and market rent (which drives coverage).
- On a cash-out refinance, the network tops out around 75% LTV on a standard rental, so a low value cuts proceeds on its own.
- Most programs review the file on the lower of the signed lease and the appraiser’s market rent. A lease above market adds nothing.
- A smaller loan means a smaller payment, which lifts coverage. That is the most common repair.
- Rent misses and value misses are different problems with different fixes.
Picture an investor who has owned a rental for a couple of years. The appraisal comes back with a healthy value and a rent opinion well below what the tenant pays. The equity is there. The coverage isn’t. That split is the whole story of this article, and it catches more cash-out files than a thin-equity problem does.
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What Does the 1007 Actually Do in a Cash-Out File?
The 1007 is the appraiser’s rent schedule for a single-family rental. It documents comparable rentals, adjustments, and an indicated monthly market rent. Fannie Mae’s appraiser update describes it as the form that lets an appraiser record estimated monthly market rent for a single-family investment property, and notes it can also be used for condos.
Two clarifications keep expectations honest. First, the form is borrowed. DSCR loans are business-purpose investor products, reviewed differently from a standard owner-occupied mortgage, and the lender’s own guidelines govern how the number is used. The form supplies the format, not the rules. Second, two-to-four unit properties use the 1025 instead, with a rent roll, and each unit is viewed separately. One weak unit drags the blended ratio down.
The blank form itself shows how the number gets built: comparable rentals, adjustments, and an indicated rent with comments on range, vacancy, and rent trends. The instructions say to adjust only for significant differences. That matters, because it means the appraiser is anchoring to rented comps rather than to your pro forma.
Which Rent Does the Lender Use?
Across the wholesale network, most programs review the file on the lower of the signed lease and the appraiser’s market rent. A lease above market is capped at market. A lease below market pulls coverage down. If the property is vacant, market rent stands alone, and a vacant property is not automatically ineligible.
| Situation | Rent typically used | What it means |
|---|---|---|
| Lease above market | Market rent | Extra lease rent adds nothing |
| Lease below market | Lease rent | Coverage falls until rent resets |
| Month-to-month tenant | Lower of lease or market | Raise rent by notice first, if local terms allow |
| Vacant | Market rent alone | Some programs trim leverage |
| 2-4 units | Per-unit, blended | One low unit hurts the whole |
| Short-term rental | Platform history or market-data report | The 1007 was not built for nightly rates |
Related-party or friendly leases get closer scrutiny, and a below-market family rent lowers coverage like any other low lease. Program variance exists too: some lenders lean on the 1007 alone, while others allow a variance when a lease is documented. Because Lendmire places files across many lenders, that difference is often the first thing a broker checks.
How Does a Low Rent Schedule Become a Blocked Cash-Out?
The chain is short. The appraisal sets value, which sets the leverage ceiling. It also sets rent, which sets coverage. Coverage is monthly rent divided by PITIA: principal, interest, taxes, insurance, and association dues. Clearing 1.00 means rent covers that payment on paper. It does not mean the property cash flows, because repairs, vacancy, management, utilities, and capex sit outside the calculation.
Run the numbers on a modeled example. Suppose a borrower’s own model shows coverage near 1.10x. The appraiser’s rent conclusion comes in 10% lower. Coverage slides to roughly 0.99x. That is the difference between a program that starts at 1.00 and a different path entirely. These are modeled assumptions, not market data.
Cash-out is more exposed than a rate-and-term refinance for a simple reason. A cash-out loan is larger, so the payment is larger, so the same rent covers less. A rate-and-term file with no cash back (up to 85% LTV on a refinance that returns no cash) carries a lighter payment against the same rent. The cash you pull is the lever that breaks the ratio. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
On a purchase you can renegotiate price with a seller. On a refinance there is no seller. Proceeds shrink instead.
Here is the catch that surprises people: rent and value fail independently. A property can appraise well above its purchase price and still lose proceeds because the rent opinion is weak. Plenty of investors only check the value number and get blindsided.
Diagnose First: Value Miss, Rent Miss, or Both?
Before choosing a fix, identify which number missed. The remedies differ.
| What missed | Symptom | What changes | Evidence that helps |
|---|---|---|---|
| Value | Appraisal under expectation | Cash-out ceiling drops | Closed comparable sales |
| Rent | Rent opinion under lease or model | Coverage drops | Comparable leases, feature differences |
| Both | Low value and low rent | Smaller loan and weaker ratio | Both sets of evidence |
For a value miss, Lendmire’s piece How to Protect a Rental Cash-Out Refinance From a Low Appraisal covers that side in depth. This article stays on the rent side.
One pattern shows up repeatedly on smaller cash-out files. The failure is rarely thin equity. It is rent evidence and carrying costs: the appraiser’s rent lands under the lease, or the insurance quote arrives late and higher than assumed. Both push coverage down after the borrower has already planned around a number.
Your Options, Ranked by How Often They Fit
A low 1007 is rarely a flat denial. It is a fork in the road, and each branch has a cost.
| Option | When it fits | Trade-off |
|---|---|---|
| Take a smaller draw | Equity is ample, coverage is close | Less cash out |
| Challenge the rent figure | Missed comps or factual errors exist | Not guaranteed to move the number |
| Reset the lease | Legacy or below-market rent | Needs a real tenant agreement at market |
| Sub-1.00 path | Coverage lands just under 1.00 | Available through select lenders, with leverage and terms adjusted |
| Switch lender or program | Current lender leans only on the 1007 | Different guidelines, possibly different pricing |
| Wait and reprice | Lease renews soon | Delays the cash |
| Walk away | Cost of cash exceeds its use | Preserves current loan |
Coverage figures matter here. 1.00 is where many select programs start, while a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. These are two different paths, not one program with a moving floor.
The smaller-draw option deserves a plain look. Because the payment falls with the loan amount, trimming the draw can pull coverage back over the line. Whether that works depends on how much cash you actually need. If the proceeds were earmarked for the next down payment, a smaller draw may undercut the whole plan. In that case, the question is whether the numbers on the next deal still work, or whether the cash-out was solving the wrong problem.
A larger down payment on a purchase can lift coverage, but on a refinance the analog is simply borrowing less. Neither erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
How Does a Rent Reconsideration Actually Work?
A reconsideration of value (ROV) is a formal request sent through the lender, never directly to the appraiser. It asks the appraiser to revisit the rent conclusion based on new evidence. Think of it as a documented correction, not a negotiation.
What tends to help:
- Comparable leases the appraiser missed, nearby and similar in size and condition.
- Documented feature differences, such as an added bathroom or a finished room not reflected in the adjustments.
- Factual errors in the report, such as wrong square footage or bedroom count.
What rarely moves the number:
- Asking prices on listings, which are not signed leases.
- Trend arguments (“rents are rising”).
- Pressure applied directly to the appraiser.
Be realistic about odds. A reconsideration can fix a clear omission; it seldom reverses a defensible opinion. If the evidence is thin, a smaller loan or a lease reset may be the more reliable path. The call is genuinely close in some files: a challenge costs little to file but can cost time, while resizing is certain but trims proceeds. Investors with strong, specific comps lean toward the challenge. Investors with soft evidence lean toward resizing.
Stress-Test the Rent Before You Order
Fixing a thin coverage ratio is far easier before the appraisal than after it. Quotes built on assumed rent are estimates. Treat them that way.
1. Model a conservative haircut. Drop your assumed rent by 10% and see where coverage lands.
2. Size the loan so the haircut case still clears the program’s coverage floor with room to spare.
3. Pull current tax and insurance figures before submitting. A late, higher insurance quote moves coverage as much as a rent miss.
4. If a below-market lease is in place, reprice at renewal before applying when local law and the lease allow it.
5. Gather comparable-lease evidence in advance so a possible ROV is ready rather than rushed.
If the haircut case fails at the cash-out amount you want, that is information. It may point toward a smaller draw, a stronger-coverage property, or a different lane before you pay for the appraisal.
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.
Where the General Rule Breaks
Short-term rentals. The 1007 was built for long-term monthly leases. Nightly rates cannot be multiplied out to fit it. Network programs generally look to platform history or a market-data report. Short-term rental programs run lower on leverage: cash-out and refinance sit around 70%, with a 640+ score and roughly 12 months of hosting history expected. 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.
Vacant properties. Market rent carries the file alone. Some programs discount it or trim leverage, so a low 1007 hurts more because no lease backs it up.
Below-market legacy leases. The lease rent is used. Options are to wait and reprice at renewal, renew higher where permitted, or accept less cash.
Month-to-month tenants. Rent can sometimes be raised by notice under local lease terms, then documented, before applying.
Property types. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs, so a rent opinion never rescues them.
Key Terms Defined
Form 1007: the appraiser’s single-family comparable rent schedule, which produces an indicated monthly market rent.
Form 1025: the equivalent appraisal exhibit for two-to-four unit properties, paired with a rent roll.
DSCR: debt service coverage ratio, meaning rent used for lender review divided by PITIA.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly obligation.
Lower-of rule: the common convention of qualifying on the lesser of the signed lease and market rent.
Reconsideration of value (ROV): a formal request, sent through the lender, to review an appraisal conclusion using new evidence.
What the Program Numbers Look Like
On a standard-rental cash-out, most files in the network cap at 75% LTV, with about six months of ownership (measured from title recording) as the usual seasoning expectation. Coverage of 1.00 is where select programs start, and stronger ratios open better leverage and pricing. Credit floors begin at 620 in parts of the network, with most programs wanting around 660 and 700+ unlocking the strongest tiers. Reserves commonly run around six months of PITIA, stepping up to about nine months above $1,500,000. Standard programs reach $3,000,000, with smaller balances routed through select lenders. All of this is subject to lender guidelines and property review, and none of it is a commitment to lend. Tax treatment varies; consult a qualified professional. The complete DSCR loans guide walks through the full program structure.
Frequently Asked Questions
Can I supply my own rent number instead of the appraiser’s?
Not as the qualifying figure. The appraiser’s market rent is independent of both borrower and lender, which is why it carries weight. You can document a signed lease, but underwriting generally takes the lower of the lease and market rent.
Does a strong signed lease override a low 1007?
No. The lease works as a ceiling, not a boost. If the lease is higher than the market opinion, market rent controls. If the lease is lower, the lease controls.
Does a low 1007 change my property value or LTV?
Not directly. Value and rent are separate outputs of the same appraisal. A low rent opinion cuts coverage, while a low value cuts the cash-out ceiling. One can miss without the other.
Can I still do a rate-and-term refinance if the rent comes in low?
Often, yes, since no cash comes back and the loan is typically smaller than a cash-out version. Coverage still has to clear the program’s floor, but the lighter payment gives more room. A refinance that returns cash is cash-out, with the 75% ceiling on a standard rental.
Is a high lease a problem?
Not a problem, just no help. Underwriting caps rent used for lender review at market, so a lease above market adds nothing to coverage.
If you are 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. The strongest cash-out plans start with the assumption that the appraiser’s rent will land below your model, and size the loan to survive it.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Appraiser Update
2. Blank Form 1007, Single Family Comparable Rent Schedule (Ohio DOT hosted copy)
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: Home Equity Line of Credit Bank on Investment Property · Mortgage Fully Paid Off HELOC to Invest · Give Home Equity Loan on Investment Property in LLC
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.