The Quick Read: On most programs, the underwriter credits the lower of your signed lease and the appraiser’s market rent. A vacant property runs on the appraiser’s figure alone. That number is divided by the full monthly housing payment to produce your coverage ratio, and it can differ from the rent you actually collect.
- Occupied property: the lower of the lease and appraised market rent is counted.
- Vacant property: appraised market rent carries the whole calculation.
- Above-market lease: the extra rent earns nothing.
- Short-term rentals: these follow a separate documentation path, because the standard rent form cannot price nightly stays.
- Rules vary by program: this is a lender convention, not a law.
What Does “Counted Rent” Actually Mean?
Counted rent is the monthly rent figure the underwriter plugs into the top of the ratio. It is not necessarily what the tenant pays, and it is not what you hope to charge.
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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.
Three different rents float around every file:
- Collected rent is what the tenant pays today.
- Projected rent is what you believe the unit could earn. Underwriters give projections and asking rents no weight on their own.
- Counted rent is the figure the lender accepts after comparing the lease with the appraisal.
For residential DSCR loans, the formula is simple. Counted gross monthly rent is divided by PITIA, which stands for principal, interest, taxes, insurance, and any HOA dues. A ratio of 1.00 means counted rent exactly equals that payment. Commercial lending uses a different test: net operating income over annual debt service. The residential version is a gross-rent test.
Which Rent Figure Gets Counted?
The figure depends on whether the property is leased or vacant. Across the lenders we place files with, the lower-of convention is the most common. Each program sets its own rule, and no federal regulator dictates this one.
| Situation | Figure counted | Why |
|---|---|---|
| Leased at market | Lease (equals market) | Both figures agree |
| Leased above market | Appraised market rent | Surplus rent is assumed to fade |
| Leased below market | The lease | The lower figure governs |
| Vacant | Appraised market rent | No lease exists to compare |
| Month-to-month or expired lease | Often market rent | Program-dependent |
| Short-term rental | Separate STR documentation | The standard rent form cannot price nightly stays |
One more variable is the transaction type. On a purchase, the lease may come from the seller’s tenant. On a refinance, you hold the lease and often the payment history. The lower-of logic is similar in both cases, but programs differ on the proof they want. The only way to know is to ask for the rent basis before you apply.
Who Sets the Market Rent Number?
The appraiser sets it, and the appraisal does two jobs. It establishes value, which drives your loan-to-value ratio (LTV, the loan size as a percentage of value). It also establishes market rent, which drives your coverage ratio.
The rent schedule form is Form 1007 for one-unit properties and Form 1025 for two-to-four units. Fannie Mae’s appraiser guidance describes the 1007 as the tool for documenting monthly market rent on a single-family investment property. Freddie Mac publishes the same form as Form 1000. The appraiser compares rental comps, adjusts them for meaningful differences, and reconciles to an indicated monthly market rent.
Notice what the appraiser does not do. The appraiser documents rent. McKissock, an appraiser-education provider, notes that the lender makes the actual income determination. Those forms were built for conventional lending. DSCR lenders borrow them, but DSCR files skip traditional personal-income documentation and debt-to-income math. Qualification runs primarily on property-level rental income covering the payment, subject to lender guidelines.
How Does Underwriting Treat Rent, Step by Step?
1. Order the appraisal. It returns both value and a market rent figure.
2. Pull the lease. For an occupied unit, the underwriter reads the signed lease. Some programs also ask for proof the tenant has actually paid.
3. Compare the two. The lower of lease rent and appraised rent is counted.
4. Test each unit. On a duplex through fourplex, each unit is generally tested against its own lease or market rent. The sum becomes the gross income figure.
5. Divide by PITIA. The result is your ratio.
6. Check it against the program. On the programs we place with, 1.00 is where select programs start. Stronger ratios open better pricing and leverage.
Step 6 is where the appraisal can change your quote. A deal priced on your lease alone can shift when market rent returns lower.
What Does This Look Like on One Property?
Take a single rental with a fixed monthly payment and run it through four scenarios. These are modeled ratios, not market data.
| Scenario | Ratio on lease | Ratio on market rent | Counted ratio |
|---|---|---|---|
| Lease above market | About 1.25x | About 1.15x | 1.15x |
| Lease at market | About 1.15x | About 1.15x | 1.15x |
| Lease below market | About 1.05x | About 1.15x | 1.05x |
| Vacant | — | About 1.15x | 1.15x |
The first row is the one that catches investors. The strong lease looks like a 1.25x deal, but the file is underwritten at 1.15x. The third row is the quiet one. A friendly or outdated lease pulls the ratio down, and the appraisal cannot lift it back up.
Now the reverse. Taxes and insurance do not shrink when rent does, so a rent miss hits the ratio one-for-one. A file at roughly 1.10x on the lease falls to about 0.99x if market rent comes in 10% lower. That miss can mean a smaller loan rather than a dead deal, as leverage and terms adjust to the file. Coverage below 1.00 is a separate path from the 1.00 programs. It is available through select lenders in the network, with leverage and terms adjusted.
To work backward, multiply your target ratio by the full payment. To reach 1.20x, counted rent must sit 20% above PITIA. Before you chase a ratio, ask what rent the underwriter will credit.
What Counts as Income, and What Does Not?
Base rent on the lease is the anchor. Everything else is secondary, and treatment varies by program.
| Income type | Usual treatment |
|---|---|
| Base monthly rent | Counted, subject to the lower-of test |
| Pet rent, parking, late fees | Typically not counted |
| Utility reimbursements | Program-dependent |
| Furnished or all-inclusive rent | Depends on how the appraiser prices it |
| Above-market rent surplus | Not counted |
| Projected or asking rent | Not counted |
Two related cases deserve a warning. Leases between family members or related parties get extra scrutiny when rent looks below market. Per-bedroom or room rentals are another gap. The 1007 prices a whole-property lease, not individual bedroom leases, so room-by-room income is hard to document on standard programs.
How Are Multi-Unit Properties and Mixed Rent Rolls Treated?
Each unit is tested on its own, then added together. Picture a fourplex with four different situations:
- Unit A is leased above market, so it is counted at market.
- Unit B is leased at market, so the lease stands.
- Unit C is leased below market, so the lease governs.
- Unit D is vacant, so it is counted at market rent.
One high lease does not rescue a low one. Surplus on Unit A cannot offset the shortfall on Unit C. This is why a mixed rent roll can underwrite lower than the sum of what you expect to collect.
Why Don’t Short-Term Rentals Run Through the Same Form?
The rent schedule was built for monthly leases. Fannie Mae told appraisers that the 1007 calls for an indicated monthly market rent and comparable properties leased on a monthly basis. It also says multiplying a nightly rate by 30 is incorrect, per the same appraiser guidance. The form cannot determine or document short-term rental rates.
So STR files use another path. Commonly, that means an appraiser’s STR analysis, platform or property-manager statements, or bank deposit history. On a purchase, a third-party projection is sometimes accepted. The network generally expects about 12 months of hosting history on STR files and a credit score of 640 or higher. Leverage runs lower than on standard rentals: up to 75% LTV on a purchase, around 70% on a refinance, and 70% on a cash-out for short-term-rental collateral. Standard rentals reach 75% on a cash-out.
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.
What If the Appraised Rent Comes in Low?
You have three realistic options.
- Challenge the rent. Ask for a review and supply stronger rental comps: similar size, condition, and location, leased on monthly terms. Evidence persuades; anecdotes do not.
- Fix a below-market lease. If a lease pulls the ratio down, renewing at documented market rent before the appraisal can help. Check with your broker first on whether the program accepts the new lease.
- Restructure the file. A larger down payment lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
Prevention beats cure. Gather comps before you apply, and know which rent basis the program uses.
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 Does the General Rule Break?
Treat the lower-of rule as a convention rather than a regulation. Programs differ on how they handle above-market leases, month-to-month tenancies, ancillary income, and related-party leases. You will see the lower-of test most often, but the details around it shift.
A few facts hold across the board:
- Clearing 1.00 is not positive cash flow. DSCR compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside the calculation.
- The rent form is borrowed. The 1007 is a mortgage-industry form that DSCR lenders adopted. It is not a DSCR form.
- Some properties are out. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the network’s DSCR programs.
- No-ratio structures exist, narrowly. They are available only through select lenders, generally for borrowers who already own a primary residence.
For context on how a different type of lender treats the same rent, see Lendmire’s article How Much Rental Income a Conventional Lender Counts From DSCR Rentals. The complete DSCR loans guide covers the full qualification picture.
What Program Parameters Surround the Rent Test?
Rent coverage is one of several tests. These are typical ranges across select lenders in the wholesale network, and every file is underwritten individually, subject to lender guidelines.
- Coverage: 1.00 is where select programs start. Stronger ratios open better leverage.
- Purchase leverage: most files land at 75%-80% LTV on an investment property. Select high-leverage programs reach 85% with roughly a 700+ score.
- Cash-out refinance: about 75% LTV on a standard rental, with around 6 months of seasoning common.
- Credit: a 620 floor exists in parts of the network, most programs want about 660, and 700+ unlocks the strongest tiers.
- Reserves: commonly around 6 months of PITIA, often stepping up to about 9 months above $1,500,000.
- Loan size: up to $3,000,000 on standard programs.
Which Documents Should You Gather?
Have these ready before you apply:
- Signed leases for every occupied unit, plus any renewal
- Proof of rent payment, if the program asks
- A current rent roll for multi-unit properties
- For STRs: platform or manager statements, or bank deposit records
- A short list of rental comps you trust, in case the appraisal needs a challenge
Key Terms Defined
Counted rent: the monthly rent figure the underwriter accepts for the ratio, after comparing the lease and the appraisal.
Market rent: the appraiser’s indicated monthly rent for the property, based on comparable rentals.
PITIA: principal, interest, taxes, insurance, and any HOA dues, which together form the full monthly payment.
DSCR (debt service coverage ratio): counted monthly rent divided by PITIA. It shows how well rent covers the payment.
Form 1007 / Form 1025: the appraiser’s rent schedules for one-unit and two-to-four-unit properties.
LTV: the loan amount as a percentage of the property’s value.
Frequently Asked Questions
Does the underwriter use my actual rent or market rent?
Usually the lower of the two on an occupied property. If your lease is below market, the lease governs. If it is above market, the appraiser’s figure governs. Vacant properties use market rent alone. Exact treatment varies by program.
Does pet rent, parking, or late fees count?
Typically not. Base rent is the anchor, and ancillary income is usually excluded or treated case by case. Ask your broker before you build a deal around it.
Is a vacant property a problem?
No. A vacant property is underwritten on the appraiser’s market rent. You do not need a tenant in place, but program guidelines still apply to leverage, credit, and reserves.
Can I use Airbnb income on a DSCR loan?
Yes, through select programs with a different documentation path. Expect about 12 months of hosting history, a 640+ score, and lower leverage than standard rentals. The standard rent form cannot price nightly rates.
Does a 1.00 ratio mean the property breaks even?
No. The test compares rent to PITIA only. Repairs, vacancy, management, and utilities are outside it, so a property can clear 1.00 and still run tight on real cash flow.
What Should You Do Next?
Before you apply, confirm which rent basis the program uses and assemble your comps. Renew any below-market lease at documented market rent if the program allows it. Do not count on an above-market lease to carry the ratio.
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 mortgage broker arranging DSCR financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. You can reach the team at 828-256-2183.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a 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. Fannie Mae Appraiser Update
2. Freddie Mac Form 1000 (Fannie Mae Form 1007)
3. McKissock Learning: Form 1007 and Short-Term Rental Appraisals
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 Cash a DSCR Cash-Out Frees Up for the Next Rental · How Much a Jumbo DSCR Cash-Out Releases for a Retiree’s Next Rental · Can You Get a DSCR Loan on a Whitefish Vacation Rental?
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.