Two numbers decide every DSCR loan: the qualifying rent and the qualifying payment. Borrowers obsess over the payment side — rate, points, buydowns — and almost nobody pays attention to how the rent side actually gets established. That is a mistake, because the rent number does not come from your pro forma or your property manager. It comes from Form 1007, the Single-Family Comparable Rent Schedule, completed by the appraiser alongside the standard valuation. A 1007 that lands $150 below your actual market rent can drop a 1.25 ratio to 1.10, push you into a worse pricing tier, or knock the deal below a lender's 1.00 floor entirely. Understanding how that number gets built — and what you can do when it comes in wrong — is one of the highest-leverage skills in DSCR borrowing.
What the 1007 actually is
The Form 1007 is a one-page addendum to the appraisal in which the appraiser identifies three or four comparable rental properties, adjusts their rents for differences in size, condition, bedroom count, and amenities, and reconciles to a single opinion of market rent for the subject property. For 2-4 unit properties the equivalent document is the Form 1025, which performs the same exercise unit by unit. Nearly every DSCR lender orders one or both with the appraisal, and the resulting market rent figure is the backbone of the DSCR ratio calculation that determines approval and pricing.
The critical thing to understand is that the 1007 is an opinion built from rental comps, not a survey of what your property could actually command. In thin rental markets, the appraiser may be reaching for comps that are six months old, two neighborhoods away, or in materially worse condition than your renovated subject. The form has adjustment grids, but rental adjustments are far less standardized than sales adjustments — there is no rental equivalent of the paired-sales analysis appraisers lean on for valuations. Two competent appraisers can produce 1007s that differ by 10 percent on the same property.
Market rent versus lease rent: which number qualifies
Lender policy on this point varies more than almost any other DSCR underwriting term, and it directly affects which deals work. The common frameworks look like this:
The most conservative shops qualify on the lower of the executed lease or the 1007 market rent. If your lease says $1,800 and the 1007 says $1,650, you qualify at $1,650. If the lease says $1,650 and the 1007 says $1,800, you still qualify at $1,650. This is the default at many top-tier non-QM lenders.
More flexible lenders allow the lease to govern even when it exceeds the 1007, typically with a cap — lease rent up to 110 percent or 120 percent of the 1007 figure is usable, with anything above the cap haircut back. This matters enormously for Section 8 contracts, which in metros like Memphis and Cleveland frequently run 10 to 25 percent above the appraiser's market rent figure because HUD fair market rents have outpaced private comps in working-class submarkets. A lender that caps at the 1007 will torpedo a Section 8 deal that cash flows beautifully in real life; a lender that accepts the HAP contract rent will price it like the 1.30-plus deal it actually is.
Vacant properties qualify on the 1007 alone at most lenders, sometimes with a 5 to 10 percent vacancy haircut or a one-notch pricing adjustment. A handful of lenders will not lend on vacant properties at all below a 1.15 ratio. If you are buying vacant with a tight ratio, the 1007 is the entire ballgame — there is no lease to argue from.
How appraisers build the number — and where it goes wrong
Appraisers pull rental comps from MLS rental listings, their own files, and increasingly from aggregator data. The failure modes are predictable. In appreciating rental markets, closed comps lag asking rents by 60 to 120 days, so the 1007 systematically trails the market on the way up. In neighborhoods transitioning from C-class to B-class stock, the available comps reflect un-renovated units, and the adjustment grid rarely captures the full premium a gut-renovated property commands. And in markets with heavy investor activity, the same few comps get recycled across dozens of reports regardless of fit.
Condition adjustments are the most common shortfall. A BRRRR investor who put $45,000 into a full renovation — new mechanicals, kitchen, baths, flooring — is often handed a 1007 built from comps in original condition with a token $50 to $75 condition adjustment. On a property renting for $1,500, the true renovation premium might be $200 to $300 a month. That gap is the difference between a 1.28 and a 1.08, and it shows up at exactly the wrong moment: the cash-out refinance that completes the BRRRR cycle.
The reconsideration of value process for rent
Most investors know they can challenge a low valuation. Fewer know the same process applies to the rent schedule. If the 1007 comes in below market, you can submit a reconsideration through the lender with supporting evidence: an executed lease at the higher figure, three to five better rental comps with addresses and rent amounts, documentation of the renovation scope, or a current HAP contract for Section 8 tenants. Appraisers are not obligated to move, but well-documented rent reconsiderations succeed more often than value challenges because the appraiser has less invested in the rent opinion — it is an addendum, not the core assignment.
Timing matters. Flag the issue inside the appraisal contingency window on a purchase, and before rate lock expiration on a refinance. A reconsideration typically adds 5 to 10 business days. If the appraiser will not move and the deal still pencils, ask the lender whether a second 1007 from a different appraiser is permitted — some allow it with a documented deficiency in the first report.
Short-term rentals: a different document fight
For STR properties the 1007 is largely useless — it reflects long-term market rent, which on a Pigeon Forge cabin or Gulf Shores condo might be a third of actual short-term revenue. STR-friendly lenders substitute 12-month booking statements from Airbnb or Vrbo, or third-party projections from AirDNA, typically haircut to 70 to 80 percent of gross. Lenders that lack an STR program simply qualify the property on the long-term 1007 figure, which kills most resort-market deals on arrival. The full underwriting treatment is covered in our guide to short-term rental DSCR financing; the practical point here is to confirm which rent document governs before paying for the appraisal.
Running the numbers before the appraiser does
The best defense against a bad 1007 is knowing your ratio sensitivity in advance. Before you order the appraisal, run the deal at three rent assumptions: your expected rent, 5 percent below, and 10 percent below. If the deal only works at your expected number, you are exposed to ordinary appraiser variance — consider a larger down payment, a rate buydown, or a lender with a lower DSCR floor. The DSCR calculators on this site let you stress-test the ratio against rent and rate simultaneously, and the state pages — Ohio, for instance — flag tax and insurance line items that compound a weak rent number.
Property taxes and insurance deserve special attention in this stress test because they hit the same side of the ratio. A 1007 that comes in 8 percent light in a high-tax market does twice the damage it would do in a low-tax one, which is why the same rent miss that is survivable in Alabama can be fatal in Texas.
Questions to ask a lender before you order the appraisal
The rent schedule rules are buried in lender guidelines, so ask directly: Do you qualify on lease, 1007, or lower-of-both? Is there a cap on lease rent above the 1007? How do you treat Section 8 HAP rents? What is the vacant-property policy and haircut? Do you accept STR revenue documentation, and at what haircut? Is a rent reconsideration of value permitted, and a second 1007? The answers vary enough across the market that the same property, same lease, and same borrower can produce qualifying ratios from 1.05 to 1.35 depending on the shop. The lender directory tags which programs accept Section 8 contract rents, STR revenue, and lease-over-1007 qualification so you can match the deal to the guideline before spending $550 on an appraisal that the wrong lender will read against you.