Rent Schedule vs Actual Rent in DSCR Underwriting

One of the most confusing aspects of DSCR lending is which rental income number the lender actually uses. Is it what your tenant currently pays? What the appraiser says it should rent for? What Zillow estimates? The answer depends on your lender, your property's situation, and whether you have a lease in place.

The Three Rental Income Numbers

1. The 1007 Rent Schedule (Appraiser's Opinion)

The Fannie Mae Form 1007, also called the Single Family Comparable Rent Schedule, is completed by the appraiser as part of your DSCR appraisal. The appraiser:

• Identifies 3+ comparable rental properties in the area
• Adjusts for differences in size, condition, bedrooms, bathrooms, amenities
• Arrives at an estimated fair market rent for your subject property

This is an independent, third-party opinion of what your property should rent for. Most DSCR lenders use this as their primary income figure.

2. The Actual Lease Amount

If your property has a current tenant with a signed lease, the actual lease rent is another data point. Some lenders prefer the lease amount because it represents real, contracted income rather than an estimate.

3. Market Rent Estimates (Zillow, Rentometer)

Online tools provide market rent estimates, but no DSCR lender uses these directly. They're useful for your own due diligence but won't appear in the lender's underwriting file.

Which Number Do Lenders Use?

The answer varies by lender, but here are the most common approaches:

Approach 1: Lower of 1007 Rent or Lease (Most Conservative)

Many institutional DSCR lenders use the lower of the appraiser's 1007 rent or the actual lease amount. This protects the lender:

• If the lease is below market ($1,800 lease vs. $2,000 1007), they use $1,800
• If the lease is above market ($2,200 lease vs. $2,000 1007), they use $2,000

This approach is frustrating when you have an above-market lease, but it's the safest for the lender.

Approach 2: 1007 Rent Only

Some lenders use the 1007 rent regardless of the actual lease. This helps when:

• The property is vacant (no lease to reference)
• The current lease is below market (inherited a below-market tenant)
• You plan to increase rent at lease renewal

Approach 3: Lease Amount Only

A few lenders use the actual lease when one exists, defaulting to 1007 only for vacant properties. This helps when:

• Your lease is above the 1007 estimate
• The appraiser underestimated fair market rent
• Your tenant is paying a premium for furnished or upgraded units

Approach 4: Higher of 1007 or Lease

The most borrower-friendly approach. Some smaller DSCR lenders or portfolio lenders will use whichever is higher. Great for borrowers, riskier for lenders.

When the 1007 Rent Comes In Low

This is the scenario every DSCR investor dreads. Your property rents for $2,100, you have a signed lease at $2,100, but the appraiser's 1007 comes back at $1,850.

Why 1007 Rents Come In Low

• Appraiser used outdated comps — Rental market moved up but comps are 6+ months old
• Poor comparable selection — Appraiser compared your renovated unit to unrenovated properties
• Conservative adjustments — Appraiser applied heavy negative adjustments for upgrades
• Different property type comps — Used apartment complex rents to comp a single-family home
• Limited rental data — In some markets, rental comps are harder to find than sales comps

What You Can Do

Submit a rental comp package before the appraisal:

• Active rental listings within 0.5 miles matching your property
• Recently signed leases for comparable properties (if you can get them)
• Rentometer or Zillow data showing the rent range
• Photos showing your property's condition relative to the area

Challenge the 1007 after the fact:

• Request a Reconsideration of Value from your lender
• Provide specific comparable rentals the appraiser missed
• Point out factual errors (wrong bedroom count, missed renovations)
• Success rate: roughly 20–30%

Ask your lender to use the lease instead:

• If you have a signed lease at a higher amount, some lenders will consider it
• A 12-month lease carries more weight than month-to-month
• The lease should be arm's length (not to a family member or related party)

When the Actual Lease Is Below Market

Sometimes you inherit a below-market tenant — either through a purchase with existing tenants or because the previous landlord didn't raise rents.

Impact on DSCR

If the lender uses the lower of 1007 and lease:

• 1007 rent: $2,200
• Current lease: $1,700
• Lender uses: $1,700
• DSCR impact: Significant — you're being underwritten on $500/month less than market

Solutions

• Wait for lease expiration — Apply for the DSCR loan after the current lease expires and you can sign a new tenant at market rate
• Ask the lender to use 1007 — Some will if you explain the lease was inherited and you plan to bring rents to market
• Negotiate a lease termination — If the tenant agrees, terminate early (may require a buyout) and lease at market before applying
• Use a lender that relies on 1007 — Shop around for lenders who don't require the lease amount

Short-Term Rental Income in DSCR

STR income adds another layer of complexity:

How Lenders Treat STR Income

• Conservative lenders: Use 1007 long-term rent only, regardless of STR income
• STR-friendly lenders: Use 75% of AirDNA's projected income or actual trailing 12-month STR revenue
• Most aggressive: Use 100% of trailing 12-month STR revenue with documentation

Documentation for STR DSCR

• AirDNA market report showing ADR and occupancy
• Airbnb/VRBO host dashboard showing actual revenue (12+ months preferred)
• CPA-prepared income statement
• Bank statements showing STR deposits

The STR DSCR Discount

Even STR-friendly lenders typically discount projected STR income:

• 25% discount from projected revenue (most common)
• Higher vacancy assumption (35–40% vs. 5–8% for LTR)
• Seasonal adjustment (using off-season revenue, not peak)

Multifamily Rent Schedules

For 2–4 unit properties, the appraiser completes an operating income statement instead of a 1007:

Form 1025 (Small Residential Income Property)

• Reports actual rent for each unit
• Estimates market rent for each unit
• Calculates gross potential income
• Deducts vacancy and collection losses
• Reports operating expenses

DSCR Calculation for Multifamily

Most lenders use total gross rent (sum of all units) divided by total PITIA. The 1025 form provides both actual and market rents, and lenders typically use whichever is lower per unit.

Example: Fourplex

Unit 3's above-market lease gets capped at market. The vacant unit uses market rent. Conservative but realistic.

Frequently Asked Questions

Can I raise rent before applying for a DSCR loan?

Yes, but the lease needs to be executed and ideally seasoned (1+ month of payment received). A brand-new lease at a significantly above-market rate may get scrutiny from the lender.

What if my property has never been rented?

The lender will rely entirely on the 1007 rent schedule from the appraiser. Prepare a rental comp package to support the highest defensible rent estimate.

Do DSCR lenders verify that tenants are actually paying?

Some do. They may request bank statements showing rent deposits, canceled checks, or Venmo/Zelle records. This is more common for refinances than purchases.

Can I use Section 8 voucher rent for DSCR?

Most DSCR lenders accept Section 8 contract rent. Some even prefer it because it's government-guaranteed income. Provide the HAP (Housing Assistance Payment) contract as documentation.

What happens if rents drop after I close?

The DSCR is only calculated at origination. If rents drop after closing, your lender doesn't recalculate or call the loan. However, your actual cash flow suffers, and refinancing later becomes harder.

The Bottom Line

The rent number used in your DSCR calculation can make or break your deal. Know which number your lender uses before you apply — ask explicitly. If you have a below-market lease, consider waiting to apply until you can demonstrate market-rate income. If you're worried about the 1007 coming in low, prepare a rental comp package for the appraiser.

The investors who consistently get the best DSCR terms are the ones who manage this process proactively, not the ones who hope for the best.

Curious about your DSCR at different rent levels? HonestCasa's DSCR tools let you model multiple scenarios.