The Quick Read: No lender publishes a fixed discount for distant comps, because the “discount” is an outcome, not a formula. The underwriter reads the appraisal, decides how much of the stated value the comparable sales actually support, and sizes the loan on that supported number. A well-explained report can pass untouched, while a weak one gets cut, reviewed, or sent back.
- There is no official mileage limit and no set haircut percentage.
- The lender can accept the value, ask for a revision, resize the loan to a lower value, or reject the report.
- Above $2,000,000, two appraisals are typical, and the lower value usually controls.
- On a purchase, a value cut lands on you as extra cash, because the contract price does not change.
- Sales comps set loan size. Rent comps set the coverage ratio. They are separate problems.
You are buying or refinancing a large rental, and the appraiser had to reach far for sales. This page walks through what happens next, step by step.
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As of Oct 15, 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.
What Does “Discounting a Value” Actually Mean?
Discounting means the lender sizes your loan on a lower value than the appraiser first reported. The lender does not subtract a set percentage. It reads the report and decides whether the value is supported. That judgment can end four ways.
1. Accept. The report explains why each far-away sale competes with your property. The value stands.
2. Revise or review. The underwriter asks the appraiser to fix or defend something, or orders a deeper review.
3. Resize. The lender recalculates leverage on a lower value the review supports.
4. Reject. The report is thrown out and a new one is ordered.
Lendmire’s piece How a DSCR Lender Discounts a Value Built on Distant Comps covers the same logic from the general-DSCR side. This page adds what changes when the balance gets large.
One more point. Across the wholesale network where Lendmire places files, no program we work with publishes a distance-discount figure. Anyone quoting you an exact haircut before the report is read is guessing.
Key Terms Defined
Comp: a recent sale of a similar property that the appraiser uses to estimate value.
Market area: the geographic zone where buyers see properties as real alternatives to each other.
Gross adjustment: the total dollars added or subtracted, ignoring direction, to make a comp match your property. A large total suggests the comp was not very comparable.
Desk review: a second person checks the first report’s comps and adjustments from the file. It produces no new value.
Field review: a reviewer visits the property and the comps. It is a deeper check than a desk review.
Lower-of-two-values: the common policy of sizing the loan on the lower of two appraisals. It is a lender policy, not a law.
Reconsideration of value: a request, with better evidence, that the appraiser or lender revisit a low number.
Super jumbo: an industry label for large-balance loans. No regulator defines it, and each lender draws the line differently.
Why Do Appraisers Reach for Distant Comps?
Appraisers go far when nearby sales are thin. That happens with rural land, acreage, luxury homes, custom builds, and low-turnover pockets. High-value rentals are exactly the type of property that has few true twins.
McKissock, an appraiser-education publisher, calls the problem the “Three D’s”: dated, distant, and dissimilar sales. The appraiser has to pick which compromise does the least damage. An older sale can beat a distant one when it keeps the comp inside the same market area, as long as the time adjustment is supported.
Crossing a school-district, city, or service-area line is allowed. But those lines often mark different submarkets, so the report must explain why buyers still treat the two areas as alternatives. McKissock also says rural areas may need searches well beyond typical suburban distances.
Is There a Maximum Distance?
No. The appraisal profession sets no fixed limit. Agency guidance sets no distance cap, and the test is whether the comps reflect the same market influence as the subject. The VA states in Circular 26-17-14 that it sets no minimum or maximum distance. It expects the appraiser to explain why the comps compete and whether a location adjustment was made.
So where does the one-mile rule come from? Habit. A practitioner appraiser notes that some lenders prefer comps within 1 mile in urban areas, 2 in suburban, and 5 in rural. Those are preferences, and the appraiser explains any overage. Treat them as market conventions, not rules.
| Departure from ideal | What it costs | When it works |
|---|---|---|
| Older sale | Needs a supported time adjustment | Same market area, thin recent activity |
| Farther sale | Needs a location argument | Nearby areas compete for the same buyers |
| Less similar sale | Larger adjustments | Nothing closer exists |
The common pitfall is thinking the distance is the problem. The explanation is the problem. A far comp with a clear market-area argument and modest adjustments often survives. A close comp with huge adjustments often does not.
How Does a Lender Decide Whether to Trust the Report?
The lender’s underwriter tests the report in layers. The layers escalate with loan size and with how clean the first report looks.
Step by step:
1. The appraiser widens the search, explains each choice, and adjusts. The comp grid and commentary are the core of the file.
2. An automated valuation check compares the number against a model.
3. A desk review checks comps and adjustments without producing a new value. The CE Shop notes desk reviews are more common on lower-value loans and field reviews more common on higher-value ones.
4. A field review or a full second appraisal comes in on larger or shakier files.
Some programs in our network accept a lighter review in place of a second full appraisal. The form depends on the program and on how clean the first report is.
What the reviewer weighs:
| Reviewer’s worry | What eases it |
|---|---|
| Comp is from a different submarket | Written argument that buyers shop both areas |
| Large gross adjustments | Closer or more similar substitutes |
| Sales are old | Supported time adjustments |
| Rural or unique property | Documented scarcity of any better sales |
| Narrative does not match comp choice | A report that explains every pick |
Use that as a concept, not a threshold.
For contrast only, Fannie Mae’s selling guide section on adjustments sets no net or gross adjustment limits and tells the underwriter to judge whether the value is adequately supported. DSCR lenders are not bound by that guide. They write their own tolerances, and none are published.
Why Does a Super Jumbo File Feel It More?
Large balances multiply every weakness in the comps. Three things change as the loan grows, subject to underwriting.
A second appraisal comes in above $2,000,000. Two independent opinions of value now sit in the file. Nothing is averaged, and the higher number does not win. The lower value usually controls, and leverage is recalculated on it. That is lender policy, not law. DSCR lenders set their own approach.
Leverage steps down with size. These are ceilings through select wholesale programs, on investment property, for coverage of 1.00 or higher, subject to underwriting:
| Loan amount | Purchase | Rate-term | Cash-out |
|---|---|---|---|
| $150K–$1M | 80% | 80% | 75% |
| $1M–$1.5M | 75% | 75% | 70% |
| $1.5M–$2M | 75% | 75% | 60% |
| $2M–$3M | 75% | 75% | 60% |
| $3M–$4M | 65% | 65% | — |
| $4M–$6M | 60% on review | 60% on review | — |
| $6M–$10M | 60% on review | 60% on review | — |
These bands are loan amounts, not purchase prices. Multiply price by leverage first, then read the band for that loan. The credit score each top cell needs also rises with size: 660 or better in the first band, 700 or better in the next, 720 or better from $1.5M to $3M, and 700 or better above $3M. The program floor is 660 through $3,000,000 and 700 above it. A lower score takes a lower leverage cell in the same band.
Rural and acreage limits tighten. Rural collateral on five acres or less can reach 75% on loans at or below $3,000,000. Above $3,000,000, the overlay allows no rural property and no more than ten acres on a non-rural one. Acreage makes comps scarce, so this is exactly where distant-comp trouble concentrates.
Interest-only runs up to 120 months at a 75% maximum, which matters when a trimmed value forces more cash into the deal. Lendmire’s piece on how a $4M IO super jumbo resets for a luxury STR operator shows how those structures behave on a big file.
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 Does a Lower Value Change the Loan?
A lower supported value shrinks the loan on the same leverage percentage, and on a purchase you cover the gap. Run the numbers on a modeled assumption: a property under contract at $3,000,000 with an appraisal that supports only a lower figure.
The price is $3,000,000. Say the lender sizes at 75% of the lower supported value, within the $2M–$3M band. The leverage percentage did not move. The base it applies to did. The contract price is unchanged, so every dollar of difference comes out of your pocket as cash to close.
A second consequence is easy to miss. If the cut pushes the loan down a band, the leverage ceiling can change with it. Moving from one band to another changes the percentage, not just the dollar amount.
On a cash-out refinance, the loan is capped by appraised value, not by what you paid. A thin-comp cut therefore reduces proceeds directly. Cash-out also stops above $3,000,000 in loan size, and proceeds above 60% LTV are capped at $1,500,000, subject to underwriting. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Operators who see many of these files notice a pattern. Large-balance files with thin comps tend to go smoothly when the borrower and broker raise the comp question before the appraisal is ordered, and badly when the first conversation happens after the report lands. The strongest files arrive with the contract price already stress-tested against a lower value.
Sales Comps vs. Rent Comps
They are separate problems with separate documents. Sales comps drive value and loan size. The market-rent schedule drives the coverage ratio.
| Item | Sales comps | Rent comps |
|---|---|---|
| Drives | Value and loan size | DSCR coverage |
| Fails by | Distant or dissimilar sales | Thin or mismatched rentals |
| Result | Smaller loan, more cash | Lower ratio, reduced leverage |
Coverage is monthly rent divided by the full monthly obligation. A value cut does not change that ratio directly, but a smaller loan means a smaller obligation, so coverage often improves even as proceeds shrink. Coverage of 1.00 earns full leverage. Coverage from 0.75 to 0.99 is a real path through select programs to $2,000,000, with LTV and terms adjusted, subject to underwriting. No-ratio reaches $2,000,000 only through a handful of lenders in the network, within set LTV, credit, and housing-history requirements, and subject to underwriting.
Short-term rentals add another wrinkle. They qualify on documented operating history at a discount to gross rent, up to $2,000,000. 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.
Where the General Rule Breaks
The general rule is that the report’s explanation decides the outcome. These edge cases bend it.
- Unique or luxury homes. A competing resort area can serve as a comp source if the appraiser shows buyers treat it as a better-fitting alternative than the home’s own area. Large adjustments are expected here and are not automatically fatal.
- Rural property. Some programs treat rural designation, or comps beyond a set distance, as an eligibility question rather than a value question. Above $3,000,000, rural is excluded outright.
- Older versus farther. Sometimes the older sale is the safer choice, as McKissock notes.
- Lower-of-two is common, not universal. Programs differ on how they reconcile two values.
- The 15/25 myth. Many investors believe agency rules cap adjustments at 15% net and 25% gross. An appraiser blog reports that Fannie Mae dropped those guidelines in late 2014. Individual lenders may still keep internal tolerances, but none are published for DSCR files.
What Can You Do After a Low Value?
You have five realistic paths. Each has a cost.
| Option | Trade-off |
|---|---|
| Bring more cash | Keeps the deal, lowers your return |
| Renegotiate the price | Works only if the seller has room |
| Request reconsideration with better comps | No guarantee, and the evidence must be solid |
| Restructure (lower leverage, interest-only) | Terms adjust, subject to underwriting |
| Switch property or program | Costs time and the deposit position |
For a reconsideration, supply competing sales or active listings that fit the same buyer pool. Ask whether the time and location adjustments in the report were actually supported, especially if the appraiser reached across counties or back two years. Reconsideration is a request for review, not a right.
How to Cut the Risk Before You Apply
Most of the damage is preventable before you sign a contract.
- Model the deal on a conservative value. Know what happens if the lower number controls.
- Flag thin-comp risk early. Acreage, unique design, and low-turnover areas should trigger the conversation.
- Check the leverage band. Compute price times leverage, then see which band the loan lands in.
- Confirm reserves. Six months on the subject property, twelve for first-time investors, and cash-out never counts toward reserves above $3,000,000.
- Ask what review tier applies at your loan size.
Lendmire’s complete DSCR loans guide lays out the rest of the program structure.
If you are buying or refinancing a high-balance rental property and want to see how the numbers work, Lendmire can help you compare super jumbo DSCR loan options based on the property income, the loan balance, credit profile, leverage, and investor goals. Lendmire is a broker arranging business-purpose investor financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
Tax treatment varies; consult a qualified professional.
Frequently Asked Questions
Is there a mileage limit on comps?
No published limit exists in appraisal standards, and the VA circular above says the same for its own program. Some lenders prefer closer comps, but the appraiser can explain a longer reach. Exact tolerances for any given lender are set in underwriting.
Can a lender reject distant comps outright?
Yes, but rejection is not automatic. The lender can accept the report, request a revision, order a review, resize the loan, or throw the report out. The outcome tracks how well the appraiser explains why each sale competes with your property.
Does a second appraisal change this?
It raises the stakes. Above $2,000,000, two appraisals are typical, and the lower value usually controls. A desk review is different: it checks the first report but produces no second value.
Can I choose the comps?
No. The appraiser selects them. You can supply competing sales or listings in a reconsideration request if the value comes in low, and the appraiser decides whether to use them.
Does a value cut also hurt my coverage ratio?
Not directly. Rent comps drive coverage, and sales comps drive value. A smaller loan can reduce the monthly obligation, which often helps coverage. Leverage and terms still adjust, subject to underwriting.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. McKissock: Arriving at an Accurate Appraisal Even When Comps Are Few
3. The CE Shop: What Is an Appraisal Review
4. Fannie Mae Selling Guide B4-1.3-09
5. Appraisers Blogs: Update to FNMA Selling Guide
This article is part of Lendmire’s super jumbo DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Super Jumbo DSCR Lender Reads a Luxury Condo Tower Pool · How Much a Super Jumbo DSCR Loan Lends on a Multi-Market Trust Portfolio · How a Super Jumbo DSCR Lender Underwrites a Multi-State Pool
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.