Wednesday afternoon, three days out from a Friday funding. An investor calls because his loan officer just told him the DSCR came back at 0.93 and the file needed more money down. He couldn't make the math work. He was holding a signed lease at $2,400 against a $2,310 PITIA. In his head that was a 1.04 and a done deal.
The lease was real. The tenant was real. The rent was hitting his account on the first of every month.
The appraiser had written $2,150 on the 1007.
That was the number running his file. Not the lease. Nobody had told him that was how it worked, and he learned it on a Wednesday with a funding date on Friday and a seller who was not feeling generous about extensions.
This surprises people at the worst possible moment, which is three days before closing. It shouldn't. The 1007 is not a formality and not a rubber stamp on the lease you already signed.
What is Form 1007 and who fills it out?
It's the Single-Family Comparable Rent Schedule — a one-page Fannie Mae form the appraiser completes alongside the appraisal report on a single-unit investment property. The appraiser fills it out. Not you. Not your agent. Not the lender, and not your property manager, no matter how well they know the street.
The form does one job. It pulls rental comps — closed, verified leases on comparable properties near the subject — adjusts them for bedroom count, bath count, square footage, condition and location, and lands on an opinion of monthly market rent. There's also a section for the actual rent in place when the property is occupied, which is where your lease shows up. Both numbers end up on the same page, side by side.
Single unit gets the 1004 appraisal plus the 1007. Two-to-four units run on the 1025 instead, which carries its own rent schedule inside the report, sometimes with a Form 216 on top. Same principle either way: an independent third party writes down what the subject should rent for, and underwriting reads that number.
The appraiser is not trying to hurt you. They're also not trying to help you. They have no idea what your PITIA is.
Why does market rent come in different from the rent I'm actually collecting?
Because they measure two different things. Contract rent is one negotiation, between two people, on one day, under whatever pressure existed that week. Market rent is what the unit would pull today if you listed it clean and empty. Those agree often enough that people assume they always will. They don't.
Three patterns cause most of it.
The below-market legacy tenant. Great tenant, four years in, never late, never called about anything. You kept her flat because replacing her costs more than the increase. The neighborhood moved and she didn't. She's at $1,950, the 1007 says $2,300, and you've been quietly subsidizing your own ratio for three years without realizing it cut the other way too.
The short-term rental running above market. The property grosses $4,100 in a good month off nightly bookings. The 1007 is an opinion of long-term market rent — twelve-month lease, one tenant, one payment a month. It is not an STR revenue projection. So the 1007 says $2,400 and your operating reality says something else entirely. That isn't the appraiser being wrong. That's the form measuring what the form measures.
The fresh lease to somebody you know. A lease signed eleven days ago, to a cousin, at a rent that lands the ratio at exactly 1.01. Underwriters have seen that movie. It isn't an accusation; it's a pattern they price for. Expect questions about seasoning, the security deposit, and proof the rent actually moved between two accounts.
Pro Tip: If you're buying a tenant-occupied property, ask for the last three months of rent receipts or bank deposits before you go under contract. A lease is a piece of paper. Deposits are evidence, and on a DSCR loan evidence is what carries the rent figure.
Which rent figure does my file actually run on?
On most DSCR programs, the 1007 market rent opinion — or the lower of the 1007 and the lease, which in practice means the 1007 whenever the lease is the bigger number. That is the default posture across the non-QM space and it catches people who came from conventional financing expecting the lease to govern.
Three postures, and they behave differently.
| Program posture | Rent used | Where it bites |
|---|---|---|
| Market rent only | The 1007 figure, full stop | Your above-market lease does nothing for you |
| Lower of lease or 1007 | Whichever number is smaller | Most common. You get the downside of both |
| Contract rent with support | The lease, if seasoned and documented | Usually capped at some percentage over the 1007 |
On a vacant property there's no lease to argue about. The 1007 is the only rent number in the file and it carries the whole ratio alone. Investors buying vacant units tend to treat the appraisal as a value question when it's really a value question and an income question in one envelope.
When will a lender take the lower of the lease and the 1007?
Whenever the lease is the higher number and the file can't show the rent is durable. The longer version is a list of triggers. If your deal has any of them, assume the lower figure and plan from there.
- The property is vacant or on a month-to-month with no written term.
- The lease was executed inside roughly the last 30 to 60 days, with no payment history behind it.
- The tenant is a relative, a business partner, or an entity you have an interest in.
- The unit runs as a short-term rental and the lease is a recent conversion to long-term.
- The lease exceeds the 1007 by more than the program's tolerance — often somewhere in the 5% to 10% range, though that varies and you should ask rather than assume.
It runs the other direction too, and that's the part people forget. If the lease is below the 1007, plenty of programs hold you to contract rent while the tenant is in place. The legacy tenant at $1,950 doesn't get marked up to the $2,300 market opinion just because the appraiser wrote it down.
Lower of the two means lower of the two. In both directions.
What does a $250 gap actually do to the ratio?
It moves the ratio 0.11, which is the difference between a file that clears and a file that doesn't. Here's the arithmetic on the deal I opened with.
PITIA is $2,310 — principal, interest, taxes, insurance, HOA, all in. Signed lease is $2,400. Appraiser's 1007 market rent opinion is $2,150.
| Rent figure used | Math | DSCR |
|---|---|---|
| Contract rent — the signed lease | $2,400 ÷ $2,310 | 1.04 |
| Market rent — the 1007 | $2,150 ÷ $2,310 | 0.93 |
| Lower of the two | $2,150 ÷ $2,310 | 0.93 |
$250 a month. That's the whole gap. Eight and a half dollars a day. It takes a file reading comfortably above break-even and drops it under 1.00, into territory where programs either price differently or don't work at all.
Now flip it and ask what PITIA the $2,150 market rent will actually carry, because that's the question that gets a deal closed instead of extended.
- To hit 1.00: $2,150 ÷ 1.00 = $2,150 maximum PITIA.
- To hit 1.10: $2,150 ÷ 1.10 = $1,955 maximum PITIA.
- To hit 1.15: $2,150 ÷ 1.15 = $1,870 maximum PITIA.
So the gap on a 1.00 target isn't $250 of rent. It's $160 of monthly PITIA — a loan-amount problem with a loan-amount solution. How much additional down payment closes $160 a month depends on pricing the day you lock, which is a conversation with a real quote, not a blog post. But the shape of the answer takes four minutes on the DSCR loan calculator, and knowing it on day three beats finding out on day thirty-eight.
What happens when the 1007 lands under the lease three days before closing?
Underwriting reruns the ratio with the lower figure and the file stops where it is. That is the entire event. There's no override, no phone call that fixes it, no relationship that makes 0.93 read as 1.04.
From there you have three currencies: cash, structure, or time. Cash means more down, dropping the PITIA until the market rent supports it. Structure means a different program or loan amount. Time means an extension while you challenge the 1007 — and extensions on a purchase contract are the seller's decision, not yours.
The calendar is what actually hurts. A rebuttal on a rent schedule — gathering closed lease comps, writing it up, routing it through the lender to the appraiser, waiting — runs five to ten business days on a good week. You don't have five to ten business days on Wednesday of closing week. The option that theoretically exists is the option you can't use.
The investor on that Wednesday call brought additional funds and closed the following Tuesday. Cost him a four-day extension and a seller who was, let's say, unenthusiastic. Avoidable with one question asked five weeks earlier.
Pro Tip: The day the appraisal is ordered, put a calendar reminder for the day it's due back. When it arrives, read the 1007 page before you read the value page. The value is usually fine. The rent is the one that moves your ratio.
How do I ask early which rent figure my file is running on?
At application, before you've spent a dollar, ask these four questions and write down the answers. Any loan officer who does volume in this space will answer all four without checking.
- Does this program use market rent, contract rent, or the lower of the two?
- If it takes contract rent, how much seasoning does the lease need, and what documentation supports it?
- If my lease comes in above the 1007, is there a tolerance, and what is it?
- What DSCR does the structure we're discussing need to hit?
Then ask the one that matters most: what's your read on market rent for this address? Not your rent. Market rent. A loan officer who's placed a few hundred non-QM loans has a directional feel for whether your lease sits inside market or hangs out over the edge of it.
Ask again if the property is an STR, a recent flip, or a unit with a tenant of more than two years. Those three profiles produce most of the surprises.
What can I do when the 1007 comes in low?
Read the form before you argue with it. A meaningful share of low rent schedules are ordinary errors, and errors are the easiest thing to fix. Pull the 1007 and check the comp grid line by line.
- Bedroom and bath count on the subject — a 3/2 written up as a 3/1 costs real money.
- Square footage against the actual measurement.
- Whether the comps are in your submarket or across a boundary that rents differently.
- Comp lease dates. A comp from fourteen months ago in a moving rental market is stale.
- Condition. If you renovated and the subject is described as original, that's an adjustment problem with a documented answer.
If the grid is wrong, file a reconsideration through the lender — never directly with the appraiser — and send closed leases, not active listings. Three to five, genuinely comparable, with addresses, lease dates, terms and rents. Asking prices are not evidence. Signed leases are. A tight rebuttal with four real comps gets read seriously. A note saying the number feels low gets nothing.
If the appraiser never saw the interior, or saw it mid-renovation, a re-inspection with dated photos and receipts is the cleaner path. That's a condition argument, not a comp argument, and it's often faster.
If the 1007 is simply correct and your lease was above market — which happens — restructure. Lower loan amount, larger down payment, PITIA drops to what the market rent carries. Run it against the targets above. You're solving for a PITIA number, and PITIA is the side of the equation you control.
We do business in 41+ states on the investment side and this conversation happens every week. The 1007 is a known quantity, not a mystery. It goes wrong when nobody asks about it until the appraisal is already back.
Ask in week one. It costs you a question.
For illustration only. Not a commitment to lend. NMLS #1281. Equal Housing Lender.