The Quick Read: Yes, but only up to the appraiser’s market rent figure, because a signed lease is evidence of income and does not raise your coverage ratio above what the appraisal supports. On most files in Lendmire’s wholesale network, the lender counts the lower of the lease rent and the appraisal’s market rent, so an above-market lease earns no extra credit and a below-market lease can pull the number down.
- A lease at or below market rent sets the income figure. A lease above market is capped at market rent.
- A vacant property is not disqualified. The appraiser’s rent schedule carries the income side.
- The appraisal sets both value, which drives LTV, and rent, which drives coverage. A low rent opinion can break a file that looked fine on paper.
- Short-term rental files do not run on a lease at all. They lean on hosting history.
- Clearing the coverage ratio is not the same as positive cash flow.
How Does a Lender Pick Between the Lease and the Appraisal?
The rule on most programs is simple: the lower figure wins. The lender compares the in-place lease rent with the market rent on the appraisal’s rent schedule and underwrites the smaller number. That is a lender convention, not a law, and it is written that way because a lease proves what one tenant agreed to pay, while the appraisal tests what the market will bear.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
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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.
The appraiser completes a rent schedule as an attachment to the appraisal. For a single-family home or condo, that is the form Freddie Mac and Fannie Mae publish as Form 1000 / Form 1007. The form is built on three comparable rentals, with adjustments only for significant differences, and it has a field for the subject’s actual lease. Its instructions say the lender uses it to obtain market rent from the appraiser. The 2-4 unit counterpart is Form 1025.
Those forms come from the conventional world. DSCR files don’t follow agency selling rules. The forms are simply the standard way appraisers document rent, and the network borrows the tool, not the rulebook.
Here is the practical effect, using ratios only. Say a property’s lease and the appraiser’s market rent line up. The coverage number reflects both, and the lease backs up the appraisal. Now say the lease is well above market. The number still gets built on market rent. Flip it: the lease is below market, perhaps a renewal at an old price. The number gets built on the lease. That last case is the one that surprises investors, because a signed document ends up hurting the file.
When the Lease Helps, When It’s Neutral, When It Hurts
| Situation | What rent counts | Effect of the lease |
|---|---|---|
| Occupied, lease near market | Lease and market rent agree | Helps: confirms the income |
| Occupied, lease above market | Market rent (the lower figure) | Neutral: no extra credit |
| Occupied, lease below market | The lease (the lower figure) | Hurts: caps the ratio |
| Vacant, no lease yet | Appraiser’s market rent | Neutral: nothing to weigh |
| New lease just signed | Lower of lease and market rent | Helps, with proof requested |
| Short-term rental | Hosting history, not a lease | Does little |
It helps when the lease sits at or close to market and the paperwork is clean. The lender sees two independent sources agreeing. A newly signed lease on a formerly vacant unit works the same way: if it lands close to the appraiser’s market rent, it adds comfort, because it shows the unit produces income.
It’s neutral on a vacant purchase with no lease and on an above-market lease. The appraisal’s market rent carries the income side either way. Buying a property because the in-place rent is above market does not improve loan sizing, since the ratio is still built on market rent.
It hurts when the lease is below market. An owner who rented cheaply to a long-term tenant, or a seller who signed a friendly lease just before listing, hands the lender a lower income figure to use.
What Does a Vacant Property Do to the File?
Vacancy doesn’t block a DSCR loan. With no lease, the appraiser’s market rent stands in for it, and the file runs on that figure. Across the wholesale network, vacant purchases are routine. What changes is how much weight the appraisal carries, because nothing else is there to back it up.
Condition matters more on vacant files. A rent opinion assumes the unit can be leased as it stands, so a property that needs work to be rentable invites questions. A market-rent opinion also isn’t a promise that the property will lease at that figure. If the rent schedule comes in light, the file has nothing to fall back on.
Refinances work differently. On a refinance, lenders generally want to see in-place income, so a lease and proof of payment do more work. Some programs make exceptions, and those vary by lender, which is why it pays to ask before ordering the appraisal rather than after.
What Makes a Lease Actually Count?
A lease is evidence, not the controlling figure. These are the quiet friction points on files:
- Signatures and dates. Both parties signed, and the dates make sense against the application.
- Term remaining. A lease with months left reads better than one about to expire. Expired leases that rolled to month-to-month, and leases that never had a long term, draw closer review.
- Tenant match. The names on the lease should match who lives there.
- Concessions. Free months or move-in credits can lower the effective rent the lender will count.
- Amendments. Any change to rent or term should be in the file, not left out.
- Multi-unit. Provide a rent roll and leases for each unit. Treatment is generally per unit.
A lease alone proves little. On a newly signed lease, expect requests for the security deposit and first month’s payment as proof. Seller-signed leases and leases with related parties draw the closest review, and some programs won’t accept them. Lendmire’s piece Do You Need a Signed Lease Before Closing a DSCR Loan? covers the timing side of that question.
Short-Term Rentals: The Lease Doesn’t Apply
Form 1007 estimates monthly rent only. Fannie Mae’s appraiser guidance says the form documents monthly market rent, and it is required only where rent is used to qualify. A nightly-rental file therefore can’t lean on it the way a long-term file can.
On Lendmire’s network, short-term rental files run on hosting history and market data instead. Purchase leverage tops out at 75% LTV, refinance runs around 70%, and cash-out is 70% for short-term rental collateral. Expect a 640+ credit score, about 12 months of hosting history, and a 1.00 coverage floor on purchases, with 1.00 on refinances too. All of that is subject to lender guidelines. 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.
If the Appraisal Rent Comes in Low
A low rent schedule can cause a lease-backed file to slip. Options exist, and none are guaranteed:
1. Ask for a reconsideration. Send recent rental comps that were not used, with notes on condition and unit match. A well-documented packet gives the appraiser something concrete to review.
2. Check what’s in the denominator. The ratio is monthly rent divided by PITIA: principal, interest, taxes, insurance, and association dues. Flood coverage or HOA dues can drag a ratio that looked like 1.2x on the lease down toward 1.05x once the appraised rent and full obligation are in. Pull those costs before you rely on the lease.
3. Lower the leverage. A larger down payment lowers the monthly obligation and can lift the ratio. 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.
4. Look at another program. Select lenders in the network offer coverage below 1.00 with leverage and terms adjusted. Others start at 1.00. These are different paths, not one program with a moving floor.
5. Renew at a documented market rent. If a lease is below market, renewing at a supported figure before the appraisal can help, if the tenant agrees.
Model the Deal on the Lower Number
Run the deal on the lower of the lease and the likely market rent. Never model it on the lease alone. That one habit prevents most surprises.
Picture an investor buying a duplex where the seller’s lease on one side runs well above the comps. The investor prices the deal on that lease. The appraisal comes back at market, the ratio drops, and the file needs a lower LTV or a different program. The reverse can also be true: an investor who buys a vacant unit and models market rent is less likely to be surprised, though a light rent schedule or the property’s condition can still pull the numbers down.
Clearing 1.00 is also not the same as positive cash flow. The ratio compares rent to PITIA only. Repairs, vacancy, management, utilities, and capex sit outside it. A file can clear with room to spare and still run thin once those costs show up.
On most files, 1.00 is where select programs start. Stronger ratios open better pricing and leverage. Purchases typically land at 75% to 80% LTV, and cash-out refinances top out around 75% LTV. Credit tiers run from a 620 floor in parts of the network, about 660 on most programs, to 700+ for the strongest leverage. Reserves commonly sit around six months of PITIA and step up to about nine months on loans above $1,500,000. All of it varies by lender, and no program is a commitment to lend. The complete DSCR loans guide walks through each of these in more detail, and Lendmire’s article on how a rent gap moves a newly signed lease shows the effect on the ratio.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
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.
Who Decides What the Income Is?
The lender does. McKissock’s appraiser education points out that the 1007 can be used alone or alongside lease agreements on a purchase, and with leases or tax returns on a refinance, but income is ultimately the lender’s decision, not the appraiser’s. The appraiser supplies a market opinion. The lender decides how to use it.
Key Terms Defined
DSCR: Debt service coverage ratio, the monthly rent divided by the full monthly housing obligation.
PITIA: Principal, interest, taxes, insurance, and association dues, the denominator in the ratio.
Market rent: What the appraiser’s comparable rentals suggest the unit would lease for.
In-place rent: What the current tenant actually pays under the lease.
Rent schedule: The appraisal attachment, Form 1007 for one-unit properties and Form 1025 for 2-4 units, that documents market rent.
Frequently Asked Questions
Do I need a lease to apply for a DSCR loan?
Not on a vacant purchase. The appraiser’s market rent carries the income side. Refinances lean harder on in-place leases, and requirements vary by lender, so ask before ordering the appraisal.
Will a higher lease get me a better ratio?
No. The lender counts the lower of the lease and market rent on most programs, so an above-market lease is capped at the appraised figure.
Can I use a lease signed this week?
Often yes, but expect requests for proof such as the security deposit and first payment. A lease by itself proves little to a lender, and a seller-signed or related-party lease gets the closest review.
Does a vacant property hurt approval?
Not by itself. It shifts weight onto the appraisal and the property’s condition, and it leaves no lease to fall back on if the rent schedule comes in light.
Does a lease matter for short-term rentals?
Very little. Those files rely on hosting history, about 12 months on Lendmire’s network, rather than a lease or the monthly rent schedule.
What to Ask Before You Order the Appraisal
Ask whether the program counts the lower of lease and market rent, what proof a new lease needs, whether vacant refinances are allowed, and how related-party tenants are treated. Lender answers differ, and the answers shape the whole file.
Tax treatment varies; consult a qualified professional.
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.
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.
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References
1. Freddie Mac Form 1000 / Fannie Mae Form 1007
2. Fannie Mae Appraiser Update June 2024
3. McKissock: 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 a DSCR Lender Counts Rental Income From a Signed Lease · Can You Buy a Pittsburgh Rental With a DSCR Loan? · Can You Use a Like-Kind Exchange With a DSCR Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.