The Quick Read: Usually not: on most DSCR programs a signed lease does not replace a low 1007, because the lender typically counts the lower of the lease and the appraiser’s market rent, so a lease above the 1007 is capped at the 1007 while a lease below it pulls coverage down to the lease amount. A few programs credit the lease whenever one exists, so the rent basis is a program-selection question.
- The 1007 acts as a ceiling on most programs, not a floor.
- A lease below the 1007 usually governs, which lowers coverage.
- Some programs count the lease with proof of rent received, and on those a strong lease can rescue a thin 1007.
- Confirm the rent basis before the appraisal is ordered, not after it lands.
- Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted.
Why the 1007 Usually Caps the Rent
The appraiser’s rent figure is third-party evidence. A lease is the borrower’s evidence. A lender that lets the borrower’s paper override the appraiser’s opinion has no independent check on the number that drives the loan.
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So the common pattern across the wholesale network is a lower-of rule. The lender compares the executed lease to the market rent on the appraisal and counts the smaller figure. Industry practice varies, but this is the approach investors meet most often.
Here is what that does to a file. Say a unit has a lease well above what the appraiser supports. The extra rent is real money to the owner, but it adds nothing to borrowing power. Now say the lease is below market because of a long-term tenant or an inherited lease. The lower number wins, and coverage drops even though the unit could rent for more.
Some lenders use other rent bases. The approaches most programs fall into:
1. Lower of the lease or the 1007. This is the most common. 2. The 1007 only, with the lease ignored. 3. The lease only, if one exists. 4. The higher of the two. This is rare.
Most programs the brokerage places files with sit in the first two groups. A few lenders in the network credit an existing lease, usually when the file also shows proof that rent has been paid. The strictest overlays want the lease, the deposit and the payment trail all in the file.
How Lease Position Changes the Rent Used
The table below shows the typical treatment. It reflects common lender practice, not a rule that every program follows.
| Situation | Rent typically counted | Effect on coverage |
|---|---|---|
| Lease above the 1007 | The 1007 (lower of) | Capped at market rent |
| Lease above the 1007, lease-credit program | The lease, with payment proof | Can rescue a thin 1007 |
| Lease equal to the 1007 | Either figure | No change |
| Lease below the 1007 | The lease | Coverage falls |
| Vacant property | The 1007 alone | Appraiser’s figure stands |
| Month-to-month or expired lease | Market rent, lease as support | Varies by program |
The last row matters more than investors expect. A lease that has run out of term often stops being treated as a lease at all. The lender falls back to market rent and uses the old lease only as support.
A Worked Example With Modeled Ratios
Run the numbers on a modeled single-family rental. These are assumptions for illustration, not market data.
Assume the lease supports coverage of roughly 1.25x against the full monthly obligation. Assume the 1007 supports only about 1.05x. Under a lower-of rule, the file is underwritten at roughly 1.05x. The lease did not add coverage, and the thin 1007 set the ratio.
Now flip it. Assume the lease supports about 0.95x and the 1007 supports about 1.10x. The lease is lower, so the file runs near 0.95x. That sits below 1.00, which is where many select programs start. The investor may then look at a reduced loan amount, a larger down payment, or a separate path through select lenders that takes coverage below 1.00 with leverage and terms adjusted. Eligibility depends on the lender, the credit profile and property review.
Under a lease-credit program, the first case could be underwritten at the lease figure instead. The property is the same and the tenant is the same. Only the rent basis changed.
DSCR compares rent to PITIA only, meaning principal, interest, taxes, insurance and association dues. Clearing 1.00 does not mean the property produces positive cash flow. Repairs, vacancy, management and utilities sit outside the ratio.
What the 1007 Actually Is
The 1007 is the Single-Family Comparable Rent Schedule. The form’s own instructions say the lender uses it to get market rent for a single-family investment property from the appraiser, and the appraiser prepares it as an attachment to the appraisal. The form asks for information on the physical structure, location and lease terms.
The appraiser compares the subject to other properties based on monthly rent. McKissock, an appraiser-education provider, explains that the form compares three properties to the subject. It also says the 1007 documents monthly rent while the lender makes the final determination on income. Investors often miss that the lender, not the appraiser, makes that final income determination. The 1007 is an opinion of market rent, and how it combines with a lease is the lender’s call.
The form covers one-unit properties. For two to four units, the rent analysis sits in the small residential income property report instead. The same lower-of logic applies to the rent schedule inside it.
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. Nobody outside the program sets the rent-basis rule. Each program writes its own, and the form is simply borrowed from the agency appraisal world.
For contrast, Fannie Mae’s appraiser guidance says the 1007 is only required when rental income is used to qualify on a one-unit investment property. That is an agency rule for agency loans. It does not set how a DSCR program counts a lease.
When a Signed Lease Helps and When It Does Not
A lease helps in three situations.
1. The program credits the lease. Ask for the rent basis in writing before the appraisal is ordered. 2. The lease and the 1007 agree, so the lease confirms the appraiser’s number and removes doubts. 3. The 1007 is wrong, and the lease supports a rebuttal built on better comps. Here the lease is supporting evidence, and the comps do the real work.
A lease does not help when it sits above a defensible 1007 on a lower-of program. Paying a tenant a premium, or signing a lease with an inflated figure, does not add borrowing power. It can also raise questions about an arm’s-length deal.
A lease can hurt when it sits below market. This is the trap. Investors assume the lease is a safe floor and discover it is the number the lender uses. The usual fix is to renew at documented market rent before the appraisal is ordered.
Timing matters in the other direction too. A discounted lease signed just before the appraisal can pull the counted rent down and invite questions about why the rent was cut.
What to Do When the 1007 Comes In Low
Treat a low 1007 as a file to work, not a verdict. Here is the order that works.
1. Compare the lease to the 1007. Find out which one the program counts. If the lease is lower, the 1007 is not your problem.
2. Check the appraisal for errors. Outdated comps and wrong property-type comps are the usual causes of a low figure. Look at distance, condition and unit count.
3. Build a comp package. Use recently leased properties of the same type in the same area. Asking rents and listing screenshots carry little weight, because they show what an owner hopes for rather than what a tenant paid.
4. Request reconsideration. Send the package through the lender with a short explanation of each adjustment. A well-documented reconsideration request recovers value when the original comps were weak, and it goes nowhere when the appraiser’s comps were sound.
5. Weigh a transfer only if the channel allows it. Appraisal transfers are program-dependent, and a re-order costs another fee. It is a gamble, not a strategy.
6. Consider renewing the lease at market rent. This only helps when the lease is the lower figure.
7. Compare programs. If the 1007 stands and the lease is strong, a lease-credit program may fit better. The investor can also reduce the loan amount, add equity, or look at the select-lender path for coverage below 1.00.
Know when to stop. If the appraiser’s comps are solid and your package amounts to a different opinion, the dispute is not worth pursuing. Move to step seven.
Leverage works alongside coverage. Most purchase files land at 75%-80% LTV on an investment property, and a larger down payment lowers the monthly obligation 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. For the full picture of how programs weigh these pieces, Lendmire’s complete DSCR loans guide covers the structure from start to finish. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
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.
How to Document a Lease So It Carries Weight
Under a lower-of program the lease does not raise the rent, but a weak lease can still cause delays in review. A lease that lenders trust usually has these pieces:
- The executed lease, signed by all parties, with the term and rent clearly shown.
- Proof of the security deposit.
- Proof that rent has actually been paid, such as bank deposits that match the lease amount.
- The appraisal with the 1007 attached.
- A tenant who is not related to the borrower.
A lease also proves things the dollar figure does not. It shows the unit is occupied, how long the term runs, and when rent is due. That supports the file even when the 1007 sets the number.
Red flags to avoid: a lease signed right before the appraisal with no payment trail, a related-party tenant, and rent that does not match deposits. Any of these invites a closer look. An arm’s-length lease with a clean payment history gives the lender fewer gaps to review.
For more on how a lease fits into approval, see Lendmire’s piece Does a Signed Lease Help Get a DSCR Loan Approved?.
Edge Cases Worth Knowing
Short-term rentals. The 1007 does not fit nightly-stay income, and a lease usually is not the test either. Fannie Mae states that the form was not designed for short-term rental appraisals and cannot be used to estimate a nightly fee. McKissock notes an appraiser may use another tool for a short-term rental estimate. Multiplying a nightly rate by 30 is not how the form works. On the network, short-term rentals run under their own guidelines, with purchase leverage up to 75% LTV, hosting history and a 1.00 coverage floor on purchases. 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.
Two to four units. The rent schedule sits inside a different appraisal report. Mixed-rent buildings are reviewed unit by unit, and the same lower-of logic usually applies to the total.
Month-to-month tenants. Market rent is often used, with the lease or payment history as support.
Related-party tenants. Expect closer review. An arm’s-length lease helps.
Section 8 tenants. The most conservative credible figure is typically used, supported by the housing contract.
Vacant property. The 1007 stands alone. There is no lease to weigh.
Ineligible property types. Manufactured homes, log homes and barndominiums are not offered in the network’s DSCR programs, so no rent basis rescues them.
Questions to Ask Before Ordering the Appraisal
The rent basis is inexpensive to confirm early and costly to learn late. Before the appraisal goes in, ask the loan officer these questions:
- Does the program count the lower of the lease and the 1007, the 1007 only, or the lease when one exists?
- Does a lease above the 1007 count, and what proof of rent paid is required?
- How does the program treat a month-to-month or expired lease?
- What is the coverage floor on this program, and is there a select-lender path for coverage below 1.00?
- Is reconsideration of value available, and what evidence does it want?
- Are reserves a factor at this loan size and leverage? Reserves vary by lender, leverage and loan size, and commonly run around 6 months of PITIA.
A broker who places files across many lenders can match the rent basis to the property before money is spent on the appraisal. That is the real advantage of comparing programs early.
Key Terms Defined
1007: The rent schedule form an appraiser attaches to the appraisal to give an opinion of market rent on a one-unit investment property.
Lower-of rule: A rent-basis approach where the lender counts the smaller of the signed lease and the appraiser’s market rent.
Rent basis: The rule a program uses to decide which rent number goes into the coverage ratio.
PITIA: Principal, interest, taxes, insurance and association dues, which together form the monthly obligation in the ratio.
Reconsideration of value: A written request, with supporting comps, asking the lender and appraiser to review the appraised figure.
Frequently Asked Questions
Can I use my lease instead of the appraisal rent?
On most programs you cannot. The lender typically counts the lower of the lease and the 1007. A few programs credit the lease whenever one exists, often with proof that rent has been received, so ask about the rent basis before you order the appraisal.
Does an above-market lease raise my DSCR?
Not on a lower-of program. The 1007 caps the rent, so the extra amount adds nothing to coverage. On a lease-credit program the lease may count, subject to lender guidelines and documentation.
What if my lease is below the 1007?
The lease usually governs, which lowers coverage even though the unit could rent for more. Renewing at documented market rent before the appraisal is the common fix, and it only helps when the lease is the lower number.
Can I dispute a low 1007?
Yes, through a reconsideration request. Send recent, similar leased comps and point out specific errors such as outdated or wrong-type comps. Asking rents and listing screenshots carry little weight. An appraisal transfer is program-dependent.
Is the 1007 rule set by a government agency for DSCR loans?
No. The 1007 is an agency appraisal form that DSCR lenders borrow. Each program writes its own rent treatment, which is why the answer differs from one program to the next.
Where Lendmire Fits
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 that arranges financing through select lenders in its wholesale network, covering 41 markets, including Washington, D.C. Eligibility and terms are subject to lender guidelines, and nothing here is a commitment to lend. Reach the team at 828-256-2183 or request a quote through the Lendmire quote page.
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 instructions
2. McKissock: Form 1007 and short-term rental appraisals
3. Fannie Mae Appraiser Update
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 DSCR Loan Refinance a Rental Loan About to Mature? · How to Finance a Luxury Fourplex With a DSCR Loan · How a DSCR Loan Works for a Sandusky Seasonal Rental
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.