Can I Use Projected Rent for DSCR?

Yes. You can qualify a DSCR loan on projected rent. You do not need a signed lease, a sitting tenant, or a single dollar of collected income to get financed.

This is one of the features that makes DSCR loans so useful for investors buying vacant or never-rented properties. The lender does not ask what the property currently produces. It asks what the property should produce in its market — and that estimate comes from the appraisal, not from you.

Here is exactly how projected rent works, where it comes from, and the one situation where a real lease quietly overrides it.

The default DSCR input is market rent, not a lease

A DSCR loan is underwritten to the asset. The core math stays the same on every deal: take the property’s expected monthly rent, divide it by the property’s full monthly carrying cost, and the result is your coverage ratio. That carrying cost bundles the note payment with property taxes, hazard coverage, mortgage insurance where it applies, and any HOA dues — the complete monthly obligation to hold the asset.

The question is which “monthly rent” sits in the top of that fraction. On a purchase — especially a vacant property — there is no lease to point to. So the lender defaults to the appraiser’s estimate of fair market rent for that property in that neighborhood.

That number is treated as legitimate, projected income. It drives the ratio, and the ratio drives your approval and pricing. A property that has never had a tenant can hit a strong coverage figure — think DSCR 1.20 or better — purely on its projected rent.

This is by design. DSCR lending exists to finance income potential, not income history. The qualification turns on what the building earns, not on a borrower’s W-2s, pay stubs, or filed returns.

For a buyer, the practical effect is freedom. You can close on a property the day the seller hands over the keys, then market it for lease afterward, without the lender holding your approval hostage to a tenant you haven’t found yet. The projection stands in for income that the comps say is coming. That is the entire premise of qualifying to the asset rather than to a borrower’s personal income paperwork.

Where the projected number comes from: Form 1007

The market-rent figure is not a guess you submit. It is produced by a licensed appraiser on a standardized form:

• Form 1007 — Single-Family Comparable Rent Schedule. Used for single-unit properties. The appraiser pulls comparable rentals (not sale comps) nearby and reconciles them into one fair-market-rent number.
• Form 1025 — Small Residential Income Property Appraisal Report. The 2-4 unit equivalent, which itemizes rent for each unit.

The appraiser looks at recently leased properties of similar size, condition, and location, then adjusts for differences — an extra bathroom, a garage, square footage, finish level. The output is a single monthly rent figure the lender drops straight into the top of the coverage calculation.

Because it is independent and comp-based, the 1007 estimate carries weight. You cannot inflate it by claiming you’ll charge more; the appraiser anchors to what the market actually rents for.

It helps to know what the appraiser is not doing. The 1007 does not forecast rent growth, does not assume you’ll renovate, and does not credit you for premium furnishings or a slick listing. It reflects the property roughly as it sits today, leased to a typical tenant at a typical term. If your business plan depends on pushing rents above the comp range through upgrades or repositioning, that upside is yours to capture after closing — the appraisal won’t lend against it. Underwrite the loan to the number the form supports, and treat any future gains as a margin of safety rather than part of the qualifying case.

When an existing lease overrides the projection

Projected rent is the default — but it is not always the number that wins. If the property already has a tenant under a signed lease, the rules shift.

Most DSCR lenders apply a simple guardrail: they use the lower of the in-place lease or the appraiser’s market rent.

The logic is conservative and consumer-protective. If a unit is leased at market or above, fine — but the lender won’t underwrite to rent that isn’t being collected. If a unit is leased below market, the lender treats the lower contracted figure as reality, because that is the cash the property is actually generating until the lease turns over.

This matters in a few common scenarios:

• You’re buying a tenant-occupied rental with a long-term lease signed well under today’s market. The below-market lease can pull your DSCR down even when comps would support a far higher number.
• You’re refinancing a property you already own and rent out. Here the lender will almost always look at your actual lease, not a fresh projection.
• A lease is about to expire. Some lenders will weight market rent if the term ends within a defined window. Ask before you assume — policies vary.

If you’re shopping a tenant-occupied deal, read the lease before you fall in love with the comps. The contract can be the binding number.

Short-term rentals: projections from a different source

Projected rent works for short-term rentals too, but the data source changes. A standard Form 1007 estimates long-term monthly market rent — it doesn’t capture the nightly economics of a vacation rental.

For STR deals, lenders that allow them typically lean on a market revenue projection from a service like AirDNA, sometimes blended with a 12-month operating history if the property has one. The projection accounts for seasonality, occupancy, and average daily rate in that specific market.

Not every DSCR lender underwrites short-term income, and those that do often apply tighter terms. If your strategy is nightly rentals, confirm the lender’s appetite up front. For how vacation income gets documented and discounted, dig into whether Airbnb revenue counts toward DSCR; the full operating playbook sits on the nightly-rental financing breakdown.

Projection vs. actual: know the gap

Projected rent is a financing tool, not a promise of performance. The 1007 estimate gets you qualified — it does not guarantee the property will lease at that figure on day one.

A few realities to keep in mind:

• The appraiser’s number is a market average, not a listing you’ve already filled. Vacancy, turnover, and concessions are your problem after closing, not the lender’s during underwriting.
• Your real-world rent can land above or below the projection. A well-positioned unit might beat the comp estimate; a rough one might sit. Underwrite your own deal conservatively even when the 1007 looks generous.
• Reserves still apply. DSCR lenders typically require several months’ worth of the full carrying cost held in reserve precisely because projected income and collected income aren’t the same thing. That cushion exists to carry the property through the lease-up gap.

Smart investors treat the projected number as the financing case and run their own operating case underneath it. If the deal only works at the appraiser’s optimistic estimate, it’s thin. If it works with a haircut to that number, it’s durable.

A worked example: how the projection moves the ratio

Walk through a vacant single-family purchase to see the projection in action. Skip the dollar amounts and think in relationships, because that is how the underwriting actually behaves.

Say the appraiser completes a 1007 and reconciles fair market rent to a level that lands the property at a coverage ratio of 1.18 against its full monthly carry. No tenant, no lease, no rent roll — just comps. If the lender’s floor is 1.00 and its best pricing tier opens at 1.20, you’re qualified and sitting just shy of the next pricing break. A modest rent bump in the appraiser’s reconciliation, or a slightly larger down payment that trims the carry, would tip you over the line.

Now change one variable. Suppose the seller hands you a tenant on a two-year lease signed at a rate roughly twelve percent under the appraiser’s market figure. Because most lenders take the lower of contract rent or market rent on an occupied unit, your numerator shrinks by that twelve percent. Run it through and the same property now covers at closer to 1.04. Still above a 1.00 floor, but barely — and well out of reach of that 1.20 pricing tier. The building didn’t change. The rent source did.

Flip it once more. Imagine that lease was signed above market — a tenant locked in during a hot leasing season. The lender still uses the lower number, which here is the appraiser’s market rent, so you capture none of the over-market upside for qualifying purposes. You collect it in real life, but the coverage ratio is calculated on the conservative figure.

Three versions of one deal, three different ratios, all driven by which rent number the file uses. That is why experienced buyers ask about the rent source before they ask about anything else.

Whichever figure the lender lands on — projected, in-place, or STR-derived — it sits at the top of your coverage ratio, and everything downstream depends on it:

• A strong 1007 on a vacant property can push you comfortably past the qualifying threshold.
• A below-market lease can quietly drop you under it.
• An STR projection can swing either way depending on the market and the lender’s discount.

Unsure how high your ratio has to clear for approval — or for sharper pricing? Pin down the coverage threshold most lenders enforce, then work backward to the rent number you’ll need the appraisal to support.

Bottom line

Yes — you can absolutely use projected rent for a DSCR loan, and on most vacant purchases it’s the default. The appraiser’s Form 1007 (or Form 1025 for 2-4 units) supplies a comp-based market-rent estimate that drives your ratio without a lease, a tenant, or any income docs.

The exception to watch: if a property is already leased, expect the lender to use the lower of the in-place rent or market rent. Read the lease, run the comps, and underwrite to the conservative case. Projected rent gets you financed — disciplined numbers keep you profitable.