The Quick Read: On a vacant purchase, the appraiser’s market-rent figure on Form 1007 stands in for a lease, and the lender divides that figure by the full monthly housing payment to get the coverage ratio. The property qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. That chain holds on most files in the network:
- The lender orders a full appraisal with a rent schedule attached. Form 1007 covers one-unit properties and condos, and Form 1025 covers 2-4 units.
- With no lease, there is no lower-of test. The appraiser’s number is the rent used for lender review.
- The denominator is PITIA: principal, interest, taxes, insurance, and any HOA dues.
- 1.00 is where many select programs start. Stronger coverage opens better pricing and leverage.
- Clearing the ratio is not the same as positive cash flow.
Purchase leverage typically runs 75%-80% LTV on an investment property, subject to credit, reserves, and property review. Program details change, and every file is underwritten individually.
DSCR Calculator
Run the numbers in your market
Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your own rent or nightly figures, taxes, insurance, and HOA for a more accurate picture.
Program parameters update from Lendmire’s centralized guideline source. Taxes and insurance are editable estimates.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. 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 Form 1007, and Why Do DSCR Lenders Use It?
Form 1007 is the Single-Family Comparable Rent Schedule. Fannie Mae’s form page describes it as the way a lender gets market rent for a single-family investment property from the appraiser. It is built on three comparable rentals, with adjustments only for significant differences between the comps and the subject. The appraiser comments on the range of rents, estimated vacancy, and rent and vacancy trends, then reconciles to one monthly market-rent figure.
A quick contrast, then we move on. Agency lending accepts an appraiser’s opinion of market rent when a property is not currently rented, as the Selling Guide’s rental income section lists. DSCR loans are business-purpose investor loans that do not sell to those agencies. They borrowed the form, not the agency rules. Nothing in federal law tells a DSCR lender how to use the number. That is a lender and program decision, and it is why the same report can produce different outcomes across lenders.
Can a Vacant Property Really Qualify?
Yes. Because DSCR underwriting looks at the property’s income rather than the borrower’s personal income, an empty building is not a dead end. The appraiser’s market rent plays the role a lease would play on a leased file. Most purchase-money DSCR deals are vacant at contract, which is why the 1007 sits at the center of the process.
Two conditions come with it. The property generally needs to be rent-ready, since appraiser-flagged deferred maintenance can stall a file. And the lender, not the appraiser, decides whether the figure clears the program’s coverage floor. For a deeper look at how vacancy affects leverage on larger loans, see Lendmire’s piece Can a Vacant Rental Qualify for a Jumbo DSCR Purchase Loan?.
How Underwriting Treats the Rent, Step by Step
1. Contract and appraisal order. The lender orders a full appraisal with the rent schedule attached. A one-unit property or condo gets Form 1007. A 2-4 unit property gets Form 1025 with market rent per unit. On leased small multifamily, Form 216 is sometimes paired with it to report actual operating income and expenses.
2. Access. A vacant property usually needs utilities on so the appraiser can confirm systems work. That is practitioner habit rather than a published rule, but skipping it is a common cause of rework.
3. Rent opinion. The appraiser picks comparable rentals, adjusts them, and reconciles to a single monthly figure.
4. The number becomes the numerator. With no lease to compare against, no lower-of-lease-or-market test applies.
5. The denominator is the full payment. DSCR is monthly rent divided by PITIA. Commercial-style explainers divide net operating income by debt service, which is a different formula. Don’t mix them.
6. The lender applies program rules. The appraiser stops at the rent opinion. The lender checks the coverage floor and decides whether leverage or reserves change.
7. Sizing. The loan is sized off the lower of price and appraised value. If the appraisal comes in under the contract price, the buyer covers the gap or renegotiates.
Four things move the outcome most: comp quality (recent, close, similar condition and bed/bath count), factual accuracy of the subject description, how price and rent relate to the program’s coverage floor, and how the lender handles vacancy.
Inside Form 1007: What Each Section Does for Your Rent Figure
| Section of form | What the appraiser fills in | Why it matters |
|---|---|---|
| Subject details | Address, beds, baths, size, condition | Errors flow straight into the rent opinion |
| Comparable rentals | Three comps with rents and features | Quality and closeness drive the number |
| Adjustments | Differences between comps and subject | Only significant differences are adjusted |
| Market commentary | Rent range, vacancy estimate, trends | Signals how firm the rent is |
| Reconciled rent | One monthly market-rent figure | This becomes your numerator |
The subject details row deserves the most attention. A wrong bedroom count or missed square footage does not stay a small error. It changes which comps the appraiser selects.
Which Form Applies?
| Property | Vacant at purchase | Leased |
|---|---|---|
| Single-family or condo | Form 1007 | Form 1007, compared with lease |
| 2-4 units | Form 1025, rent per unit | Form 1025, often with Form 216 |
Leased files add a wrinkle. The common convention is the lower of the lease and the appraiser’s market rent. A lease above market adds nothing, and one below market pulls coverage down.
Rent-Ready Test and Evidence for the Appraiser
Before the appraisal, check that the property can actually be rented as it stands: working systems, utilities on for the visit, no open safety defects, and finishes consistent with the comps. Heavy rehab changes the picture. A near-rent-ready home can often underwrite on 1007 comps. A home that needs real work may need short-term bridge financing first and a DSCR refinance afterward.
You can help the appraiser without steering the result. Provide an accurate property description, a list of recent improvements, and any recent local lease data you have. Your own pro forma and listing-site estimates do not set the number. The appraiser’s independent opinion does, and trying to push it creates problems.
A Worked Example With Ratios, Not Dollars
Suppose an investor is buying a vacant single-family rental at 75% LTV and expects coverage near 1.20x. The same payment, with three different appraiser conclusions, produces three different outcomes. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
- Rent comes in as expected: coverage lands near 1.20x, comfortably above a 1.00 program floor.
- Rent comes in modestly lower: coverage slips toward 1.05x, still above 1.00 but with less cushion and possibly less room on pricing.
- Rent comes in meaningfully lower: coverage falls below 1.00x.
That last case is not automatically dead. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted. A larger down payment lowers the payment and can lift the ratio, though it never erases credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
One more point on the ratio. Clearing 1.00 is not positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it, so budget for them separately.
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.
If the 1007 Comes in Low
Diagnose before you react. Check the report for unit count, bedroom and bath errors, size, and mismatched comps. If you find a factual error, ask for a correction with supporting comps. If the report is accurate, you have real options, each with a tradeoff:
| Option | Tradeoff |
|---|---|
| Renegotiate price | Seller must agree; improves coverage |
| Increase down payment | Lowers payment; ties up more cash |
| Switch lender or channel | Policies on variances and appraisal transfers differ |
| Use a sub-1.00 path | Available through select lenders; leverage and terms adjust |
Some lenders do not move off the 1007 at all, while others allow variances or an appraisal transfer. That difference is one reason a broker who sees many lenders’ guidelines can matter on a low-rent file. Lendmire’s own explainer covers how to fix a low lender rent figure on a DSCR cash-out refinance in more detail.
Where the General Rule Breaks
Short-term rentals. Form 1007 is built on monthly-lease comps. Fannie Mae’s appraiser guidance addresses short-term rentals and the form and cautions against multiplying a nightly rate by 30 days. In the network, STR purchases run to 75% LTV, expect a 640+ score, about 12 months of hosting history, and a 1.00 coverage floor. Short-term rental rules vary by city, county, HOA, and property type, so confirm local rules before relying on projected income. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
2-4 units. Per-unit rent on Form 1025 replaces the single figure. On refinances, a partly occupied building can be easier than a fully vacant one because occupied units show income.
Post-closing leasing conditions. Some lenders attach a leasing condition on certain files. Ask before choosing one.
Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in these programs, whatever the 1007 says.
What the Investor Decision Looks Like
Treat the 1007 as the underwriting number, not a formality. Screen rent before you offer, using recent leased comps of similar condition, and keep a margin for a low appraisal. Match leverage to the file: most purchases land at 75%-80% LTV, and select high-leverage programs reach 85% LTV with roughly a 700+ score. Reserves commonly sit near 6 months of PITIA, stepping up to about 9 months on loans above $1,500,000. Standard programs cover up to $3,000,000, and the network generally holds to 30-year fixed structures above $2,500,000.
For the full framework, read Lendmire’s complete DSCR loans guide. Tax treatment varies; consult a qualified professional.
Key Terms Defined
- DSCR: the ratio of rent used for lender review to the full monthly housing payment.
- Form 1007: the appraiser’s rent schedule for one-unit properties and condos.
- Form 1025: the rent schedule and income report for 2-4 unit properties.
- PITIA: principal, interest, taxes, insurance, and any HOA dues.
- Lower-of rule: the convention of using the lesser of lease rent and market rent when a lease exists.
Frequently Asked Questions
Can I use my own rent estimate or a listing-site number?
No. The lender uses the appraiser’s figure. Your pro forma and online estimates can guide your offer, but they do not set the rent used for lender review.
Does the appraiser decide if I qualify?
No. The appraiser produces the rent opinion. The lender applies the program’s coverage floor, leverage, and reserve rules, so different lenders can treat the same 1007 differently.
Does Form 1007 work for Airbnb-style income?
Not directly. The form relies on monthly-lease comps, so short-term rental files typically use a separate STR analysis, with different leverage and hosting-history expectations.
What if my property is a duplex or fourplex?
The appraiser completes Form 1025 with rent per unit instead of a single figure. Mixed occupancy can help on refinances because occupied units show real income.
Does a vacant purchase count as owner-occupied?
No. Vacancy during lease-up does not make it a primary residence, and the loan is for a non-owner-occupied investment property.
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 through select lenders in its wholesale network across 41 markets, including Washington, D.C. Not a commitment to lend.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
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 Form 1007 (form and instructions)
2. Fannie Mae Selling Guide B3-3.1-08, Rental Income
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Choose Between Purchase and Cash-Out on a Super Jumbo DSCR Loan · How to Get a DSCR Loan From Application to Closing · How to Get a DSCR Loan With Only Three Months of Rental History
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.