The Quick Read: On a fourplex, a DSCR lender assigns one counted rent to each of the four units, usually the lower of the signed lease or the appraiser’s market-rent opinion for that unit. It adds the four figures together and divides the total by one building payment. A fourplex is one test, not four. A strong unit never props up a weak one.
- Each unit is capped on its own, so an above-market lease earns nothing extra.
- A vacant unit is typically counted at the appraiser’s market rent, depending on the program.
- One payment, called PITIA, sits under all four units. It covers principal, interest, taxes, insurance, and any association dues.
- Most programs in our wholesale network start coverage at 1.00. Select lenders go lower, with leverage and terms adjusted.
- Clearing the ratio is not the same as positive cash flow.
A fourplex looks like four small rentals. A lender sees one building, one loan, and one ratio. Here is how that ratio gets built.
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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 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 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
DSCR (debt service coverage ratio): the property’s counted monthly rent divided by its monthly housing payment.
PITIA: principal, interest, taxes, insurance, and association dues, combined into one monthly figure.
Market rent: what the appraiser says a unit would reasonably rent for today.
Lower-of rule: the lender counts whichever is smaller, the lease or the market rent.
Rent roll: a unit-by-unit list showing each tenant, rent, and lease end date.
Form 1025: the appraisal form for two- to four-unit properties. It reports income at the unit level.
How Does a Lender Build the Rent Figure One Unit at a Time?
The lender works in six steps, and the order matters because each step feeds the next.
1. Classify the property. One to four units is treated as residential. Five or more units moves to commercial-style underwriting, which is a different product. Lendmire’s multifamily and super-jumbo DSCR loan page covers that path.
2. Collect unit-level documents. That means a rent roll plus a signed lease for each occupied unit. Some lenders also ask for deposit records or payment history.
3. Order the appraisal. The appraiser completes Form 1025, which Fannie Mae’s Selling Guide lists for two- to four-unit properties. DSCR loans are not agency loans. Lenders simply borrow the form as a standard way to document rent. An appraiser’s explainer on Form 1025 notes that it captures income at the unit level, so you get a rent opinion per unit, not one blended number.
4. Assign one counted rent per unit. This is where the lower-of rule applies.
5. Add the four counted rents. Divide the total by the building’s single PITIA.
6. Compare the result to the program minimum. The same ratio also feeds the leverage tiers.
Across our wholesale network, this per-unit logic is the common thread. Details like vacancy handling differ from lender to lender, which is why the questions at the end of this article matter.
Which Rent Counts for Each Unit?
For each unit, the counted rent is the lower of the lease and market rent. Vacant units generally fall back to market rent, and expired or month-to-month units usually do too. The exact treatment depends on the program.
| Unit situation | Rent typically counted |
|---|---|
| Lease below market | The lease |
| Lease above market | Market rent |
| Lease at market | Either figure |
| Vacant | Market rent, if program allows |
| Month-to-month or expired | Usually market rent |
| Family or non-arm’s-length tenant | Same test, with extra scrutiny |
Why does the lower-of rule exist? The lender is underwriting the building’s ability to carry its payment over the life of the loan. A lease above market may not survive renewal. A lease below market is real money the owner actually collects today. Taking the smaller number protects the lender from a rent that may not last. It also keeps leverage in check, because the same conservative rent feeds the leverage tiers.
Worked Example: A Fourplex With Four Different Units
Run the numbers on a modeled fourplex. The inputs below are illustrative assumptions, not market data, and they use ratios and shares rather than dollar rents.
- Unit 1: lease sits well above the appraiser’s market rent. Counted at market rent. The excess is ignored.
- Unit 2: lease matches market rent. Counted at the lease.
- Unit 3: a long-tenured tenant pays below market. Counted at the lease.
- Unit 4: vacant. Counted at the appraiser’s market rent, if the program allows it.
Say the four counted rents together give the building a ratio near 1.15x against its single payment. Now change one fact. Unit 4 stays vacant and the program counts only leased units. That removes roughly a quarter of the building’s counted rent, and the same building can slide toward 0.90x or lower.
The takeaway: with four roughly similar units, each one carries about a quarter of the counted rent. Losing one is rarely a rounding error.
Why Can’t One Strong Unit Carry the Others?
Each unit is capped before the units are added. An above-market lease on Unit 1 cannot offset a below-market lease on Unit 3. The cap happens first, and the sum happens second.
This surprises investors who expect the average to win. It does not. If three units are at market and one is far above it, the lender counts the three at market and the fourth at market too. The extra rent on the fourth is ignored.
Pooled or blanket loans work differently. Those can combine rent across several properties against a combined payment. A single fourplex loan does not.
What Does the Appraiser Do for Each Unit?
The appraiser estimates market rent for every unit using comparable rentals. Units with the same bedroom count and finish often get similar figures. A renovated unit or a different floor plan can get its own number.
Two things you control before the appraisal:
- Renew stale leases at market. A tenant paying well below market costs you coverage. Renewing before the appraisal can help, though the lender will review the new lease.
- Hand over a clean rent roll. The rent roll should match the appraiser’s unit count. A mismatch, such as an unpermitted unit or a unit that is really a converted room, invites questions.
Rent by the room and partly converted units generally count as one unit for appraisal purposes. The appraiser also sets value, so a low rent opinion can lower leverage and coverage at once.
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.
What Doesn’t Count?
The ratio is rent over PITIA. Expenses outside PITIA, such as repairs, vacancy, management, utilities, and capital improvements, are not deducted. That makes the ratio simple, but it also means clearing 1.00 is not positive cash flow. Budget those costs separately.
Short-term rentals work differently. Form 1025 reflects long-term rent. 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.
Asking rent on a vacant unit does not count. Only the appraiser’s market-rent opinion does.
Where Does the General Rule Break?
Edge cases are where fourplex files get pended. These are the ones to know.
- Vacancy limits. Some programs allow one vacant unit and want leases on the rest. Others count only leased units. This is program-specific.
- Month-to-month and expired leases. These tend to fall back to market rent, or to a lower regulated figure on rent-controlled units. Confirm every in-place rent.
- Family tenants. Expect closer review of the rent and the payment history.
- Five or more units. Commercial underwriting applies. Commercial DSCR is net operating income over debt service, while a one- to four-unit file is generally gross rent over PITIA.
- Coverage below 1.00. 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted.
- Ineligible structures. Manufactured homes, log homes, and barndominiums are not offered through the network’s DSCR programs.
How Do Leverage and Coverage Work Together on a Fourplex?
The strongest files clear two tests: enough equity and enough rental coverage. Purchase files in our network typically land at 75% to 80% LTV on an investment property, and a rate-and-term refinance can reach 85%. A cash-out refinance on a standard rental tops out around 75%.
A larger down payment lowers the payment and can lift coverage. It never erases credit floors, reserve rules, or property eligibility. Credit tiers commonly step through 620, 660, 680, and 700, with the best leverage tiers reserved for stronger scores. Reserves are commonly about 6 months of PITIA, and about 9 months above $1,500,000. Loan sizes run up to $3,000,000 on standard programs. All of this is subject to lender guidelines, and every file is underwritten individually.
What Should You Gather for Each Unit?
Build a folder before you apply:
- A rent roll with unit, tenant, rent, and lease end date.
- A signed lease for each occupied unit.
- Proof of rent payments where a lender asks for it.
- Renewal paperwork for any lease you updated.
- A plain note on any vacant, renovated, or converted unit.
For the bigger picture, see the complete DSCR loans guide.
Questions to Ask Up Front
Three questions reveal how a program treats your building:
1. How is a vacant unit counted?
2. Is month-to-month rent counted at the lease or at market?
3. Is there a cap on vacant units?
A broker who sees many lenders’ guidelines can match your building to the program whose answers fit. A fourplex with one vacant unit may be a poor fit for one lender and a clean fit for another.
Common Mistakes
- Assuming a high lease will qualify the loan.
- Expecting a strong unit to offset a weak one.
- Treating the building as four separate ratios.
- Confusing Form 1007, the one-unit rent schedule, with the two- to four-unit appraisal form. Fannie Mae’s guide separates them.
- Counting asking rent on a vacant unit.
- Reading a 1.00 ratio as profit.
Frequently Asked Questions
Does each fourplex unit need its own lease?
Occupied units typically need a signed lease so the lender can compare it to market rent. Vacant units are supported by the appraiser’s market-rent opinion instead, where the program allows it. Requirements vary by lender.
What if one lease is above market?
The lender counts market rent for that unit. The excess is ignored, and it does not offset a below-market lease elsewhere in the building.
How much does one vacant unit hurt my ratio?
With four similar units, each represents roughly a quarter of the counted rent. If the program excludes the vacant unit, coverage can drop sharply. If it counts the unit at market rent, the effect can be small.
Is the ratio calculated from net rent?
On one- to four-unit files it is generally gross counted rent over PITIA. Operating expenses outside PITIA are not deducted, which is why coverage and cash flow are different things.
Can I qualify with coverage under 1.00?
Select lenders in the network offer it, with leverage and terms adjusted. Eligibility depends on credit profile, reserves, the property, and lender guidelines.
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. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Tax treatment varies; consult a qualified professional.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 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 Selling Guide B4-1.2-01
2. Appraiser blog on Form 1025
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a DSCR Lender Calculates Loan-to-Value on a Rental · How Much a DSCR Lender Lends on an Unseasoned Rental · How Much a Jumbo DSCR Lender Lends at Each Loan Tier
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.