The Quick Read: On most programs in Lendmire’s wholesale network, the rent that goes into the coverage ratio is the lower of two numbers: the signed lease and the appraiser’s market-rent opinion from the 1007. An above-market lease earns no extra credit, a below-market lease caps the rent at the lease figure, and a vacant property runs on the appraiser’s number alone. Treatment varies by program, so confirm the rule before the appraisal is ordered.
- The 1007 sets a ceiling on counted rent on lower-of programs.
- A lease above the 1007 figure adds nothing to the ratio.
- A lease below the 1007 figure becomes the counted rent.
- Vacant, month-to-month, and expired-lease files usually lean on market rent.
- Clearing 1.00 is not the same as positive cash flow.
Most DSCR files are decided by two numbers from one appraisal: value and rent. Value sets leverage. Rent sets coverage. Investors tend to watch the first and ignore the second until the rent figure comes back low. This piece walks through where the counted rent comes from, how the appraiser builds it, and where the general rule breaks.
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As of Oct 29, 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.
Key Terms Defined
- Form 1007: the Single-Family Comparable Rent Schedule, an appraisal attachment where the appraiser gives a market-rent opinion for a one-unit rental or condo.
- Form 1025: the small residential income property appraisal used for two- to four-unit properties, with rent conclusions at the unit level.
- Market rent: the monthly rent the appraiser concludes the property would command, based on comparable rentals.
- Counted rent: the rent figure a program actually places in the numerator of the ratio.
- PITIA: principal, interest, taxes, insurance, and association dues, the monthly obligation the rent is measured against.
- DSCR: counted rent divided by PITIA. Above 1.00 means rent exceeds the payment.
What Is the 1007, and Who Owns the Number?
The 1007 is an agency form that DSCR programs borrow. It is Fannie Mae Form 1007 and Freddie Mac Form 1000, and the form’s instructions describe it as the way a lender gets market rent for a single-family investment property from the appraiser, attached to the appraisal. The appraiser completes it. The borrower does not, and the lender does not edit it.
No federal rule sets how much of that rent a DSCR lender counts. These are business-purpose investor loans, and DSCR loans are designed for non-owner-occupied investment properties. Each program writes its own guideline. The agency form is a convenient standard exhibit, but the agencies’ rules do not govern DSCR files. That distinction matters because investors often assume the 1007 carries agency-style treatment into their file. It does not. Across Lendmire’s network, the form supplies evidence and each program decides how to use it.
For form selection, Fannie Mae’s Selling Guide pairs the 1007 with one-unit investment properties and the 1025 with two- to four-unit properties. DSCR files follow the same split in practice: a rent schedule for single-family and condo, an income-property appraisal for small multifamily.
How Does the Appraiser Build the Rent Number?
The appraiser pulls comparable rentals, adjusts them, and reconciles to one indicated monthly market rent. The blank form shows the structure: comparable rentals in a grid, adjustments only for significant differences between each comp and the subject, and a final reconciliation at the bottom. The form also asks for comments on the rent range, vacancy, and rent trend, and rent concessions are adjusted to the market rather than to the subject.
Where files go wrong at this stage:
- Thin comp sets. Few nearby rentals means the appraiser stretches distance, size, or age, and the conclusion drifts.
- Active listings treated as leases. An asking rent is not an executed lease. A set heavy on listings can read high or low depending on the market.
- Missed features. A bathroom, finished basement, or garage that does not appear in the comps never reaches the adjustment grid.
- Stale comps. Leases signed in a different rent environment pull the conclusion away from the current market.
The conclusion line is the only number most programs read. Everything above it is the appraiser’s reasoning, and it is the part a borrower can influence by supplying information early.
Step by Step: How Counted Rent Gets Decided
1. The appraisal is ordered. The report returns value, which sets leverage, and a rent opinion, which sets the numerator. Single-family and condo use the 1007. Two- to four-unit properties use the 1025.
2. The appraiser concludes market rent. One indicated monthly figure comes out of the comp grid.
3. The underwriter compares it to the lease. The file typically holds the executed lease, proof of payment, and the rent schedule. On a unit-by-unit basis for small multifamily, a rent roll joins the stack.
4. The program rule applies. On most programs in the network, counted rent is the lower of the lease and the market figure. Some programs use only the market figure. A few allow a variance when a lease exists.
5. The ratio is calculated. Counted rent divided by PITIA gives the coverage number. Programs in the network typically start at 1.00 as a floor on select programs, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted.
Situation-to-Rent-Source Table
| Situation | Typical rent source | What gets compared |
|---|---|---|
| Vacant purchase | 1007 market rent | Market figure alone |
| Leased, lease above market | Lower of the two | Market figure governs |
| Leased, lease below market | Lower of the two | Lease governs |
| Leased, lease at market | Either | Figures match |
| Month-to-month or expired lease | Market rent, often | Program-dependent |
| Two- to four-unit | 1025, unit by unit | Per-unit lower-of |
| Short-term rental | Separate STR path | Not the 1007 |
Treat this as the common pattern, not a promise. Programs differ, and the table is where to start the conversation, not end it.
What Does the Ratio Look Like When the Rent Moves?
Run the numbers on one property with a fixed PITIA, and the only thing that changes is the counted rent. Take a file that clears about 1.15x on the appraiser’s number. A rent conclusion that comes in 10% lower pulls that ratio to about 1.04x. A 15% miss lands near 0.98x. These are illustrative arithmetic, not market statistics, and they show how a value that holds can still sink coverage.
Now layer the lease on top, using ratios instead of dollars:
- Lease well above the 1007 figure: counted rent equals the 1007 figure. The ratio is whatever the market opinion supports, not what the lease promises.
- Lease at the 1007 figure: the same ratio either way.
- Lease below the 1007 figure: counted rent drops to the lease, and the ratio falls with it, even if the appraiser thinks the unit could rent higher.
- Vacant: the ratio rests entirely on the appraiser.
A lease that is 10% below market has the same effect on the ratio as an appraiser who concluded 10% low. The difference is that the lease can be fixed through a rent increase or a new lease at market, documented before the appraisal. Both effects stack on a thin file. If the property sits at 1.05x on market rent and the lease is below market, the file can slip under 1.00 without any change in value. That is when a select-lender path below 1.00 comes up, with leverage and terms adjusted, or a restructure such as a larger down payment. Eligibility stays subject to lender guidelines and credit review.
Where the General Rule Breaks
The lower-of convention is common, not universal. The network-level point is that programs diverge, and the file should be matched to a program whose rule helps it.
The edge cases that move files most often:
- Vacant units in small multifamily. Some programs use market rent for a vacant unit. At least some treat it as zero. Treatment is program-by-program.
- Month-to-month and expired leases. Market rent often carries the file, but a program may ask for a renewal or proof of payment.
- Above-market lease credit. A few programs will credit an above-market lease only with several months of receipts as proof. That is the exception, and it needs to be confirmed per program.
- Short-term rentals. The 1007 was built for monthly rent. The form was not designed for short-term rentals, and multiplying a nightly rate by 30 is incorrect. Short-term files follow a separate path in the network, with purchase leverage up to 75% LTV, refinance around 70%, and cash-out at 70% on short-term-rental collateral. Expect a 640+ score and about 12 months of hosting history.
- Related-party and unusual tenants. A family tenant or an employer lease draws closer review of proof of payment. Lendmire’s piece on how a super jumbo DSCR lender counts rent from an adult child covers that situation in detail.
- Below-market inherited leases. A new owner often steps into a lease the prior owner signed. Lendmire’s explanation of how a DSCR lender counts rent from inherited tenants on old leases covers that file type.
What Counts as Rent, and What Does Not
Base monthly rent counts. Ancillary income, such as pet fees, parking, storage, and utility reimbursements, is generally not folded into the number unless the program says otherwise and the lease documents it. Rent from separately financed properties does not move to the subject property. The 1007 itself concludes on rent for the unit as a whole, not on fees.
One misreading deserves its own line. DSCR compares rent to PITIA only. Clearing 1.00 does not mean positive cash flow, because repairs, vacancy, management, utilities, and capex sit outside the calculation. A property can clear the ratio and still lose money after operating costs. Treat the ratio as a lending test, not a return metric.
What If the 1007 Comes In Low?
A low rent conclusion is a routine problem with routine steps, not an emergency. The steps, in order:
1. Read the comp grid. Check distance, size, condition, and lease date. A set of stale or distant comps is the usual cause.
2. Check for missed features. An extra bath, finished space, or updates that never reached the grid are fixable with documentation.
3. Send supporting evidence. Executed leases on nearby comparable units, with dates and terms, carry more weight than listing screenshots or a general online estimate. The appraiser’s opinion is what the lender uses, not the investor’s own research.
4. Ask for reconsideration through the proper channel. The request goes through the lender or broker to the appraisal management side. Expect a limited result. A well-documented request can move the figure, but programs are not obliged to accept an adjusted number.
5. Reconsider structure. If the ratio stays short, a larger down payment lowers the monthly obligation 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.
Better still is prevention. Raise rent and document it before the appraisal is ordered, and hand the appraiser the lease and any supporting comparable rentals.
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.
Is the 1007 Going Away?
On the agency side, yes, in most cases. Under the new UAD 3.6 appraisal format, the 1007 is not used, and market rent is developed in the Rental Information section and rental comparison grid of the redesigned URAR. A narrow exception lets a different appraiser complete a 1007 if the original appraiser is unavailable to amend the report. An appraisal-industry FAQ says the 1007 and Form 1000 will in most situations not be completed separately.
For a DSCR investor, the practical read is this: the rent opinion may arrive inside the appraisal report rather than as a separate 1007. The number is the same kind of number, and the lower-of logic does not change. Programs may keep ordering the legacy form or an equivalent rent opinion. Do not expect the form name to match across files.
Documentation Checklist
A clean rent file gives the lender fewer gaps to review:
- The executed lease, with term, rent, and signatures legible
- Proof of payment, such as bank deposits or a ledger
- The rent roll on any multi-unit property, unit by unit
- Entity documents when the property sits in an LLC, subject to lender program eligibility
- Any rent-increase notice or renewal that changes the figure
- Supporting comparable leases to give the appraiser, ahead of the visit
Reserves documentation belongs in the same package. Reserves vary by lender, leverage, loan size, and transaction type, and commonly run around 6 months of PITIA, stepping up to about 9 months above $1,500,000.
Common Mistakes
- Assuming a high lease means a high ratio. On lower-of programs the excess is ignored.
- Relying on an online estimate. The appraiser’s opinion is what counts.
- Using the 1007 for an Airbnb. The form measures monthly rent only.
- Treating the 1007 as a DSCR-specific form. DSCR programs borrow it. They do not own it.
- Reading 1.00 as profit. The ratio ignores operating costs.
- Assuming every program works the same way. It does not, which is why program fit matters before the order goes in.
Standard purchase files in the network typically land at 75% to 80% LTV, and cash-out on standard rentals tops out around 75%. Credit floors start at 620 in parts of the network, with most programs wanting around 660 and 700+ opening the strongest leverage tiers. Loan sizes run up to $3,000,000 on standard programs. Manufactured homes, log homes, and barndominiums are not offered. All of this is subject to lender guidelines, and none of it is a commitment to lend.
For the full picture of how these loans work, see Lendmire’s complete DSCR loans guide.
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. Call 828-256-2183 or request a quote through the site.
Frequently Asked Questions
Does a DSCR lender use my lease or the 1007 rent?
On most programs in the network, the lower of the two. If the lease is above the 1007 figure, the 1007 figure counts. If the lease is below it, the lease counts. Some programs use only the market figure, so match the file to the program rule before the appraisal is ordered.
What rent counts on a vacant property?
The appraiser’s market-rent opinion stands alone, since there is no lease to compare. That makes the comp set and the appraiser’s adjustments the whole numerator, which is why supplying comparable leases early helps.
Can I challenge a low rent conclusion?
Yes, through a reconsideration request with documented comparable leases and any missed features. Results vary. Some programs hold to the original figure even with supporting comps, so a structural fix, such as more down payment, is sometimes the cleaner route.
Does the 1007 work for short-term rentals?
No. The form measures long-term monthly rent and was not built for nightly rates. Short-term files follow a separate path in the network, with a 640+ score and about 12 months of hosting history typical. Short-term rental rules can vary by city, county, HOA, and property type.
Does a ratio above 1.00 mean the property cash flows?
Not necessarily. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex are outside it, so a property can clear the lender’s test and still run thin after operating costs.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 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. Freddie Mac Form 1000 / Fannie Mae Form 1007
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: Can a Non-Recourse DSCR Lender Put Each LLC in Its Own Pool? · How a DSCR Lender Counts Rental Income From a Signed Lease · How Much a DSCR Loan Lends on a Rental Purchase
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
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.