What Rent Can a Lender Use for a DSCR Loan?
AI illustration of a South Carolina rental property.
A DSCR lender may use rent from a signed lease, an appraiser’s estimate of market rent, or records it accepts for a short-term rental. Which number counts depends on the lender’s rules, how you’ll rent the home, and whether you’re buying or refinancing.
DSCR stands for debt service coverage ratio. It compares the monthly rent the lender will count with the monthly housing costs it uses for the loan. Ask which rent number goes into that math before you rely on a listing or a seller’s forecast. See how South Carolina DSCR loans work.
Run your numbers in the DSCR calculator. Enter the monthly rent you expect the lender to count and the monthly housing costs. Try a lower rent, too, to see how it changes the ratio.
What if the home already has a tenant?
Start with the signed lease and any changes to it. Check the monthly rent, when the lease ends, and whether the tenant gets any free or reduced months. On a refinance, the lender may also ask for records that show the rent came in. If the lease is new, ask whether the lender needs proof that the first rent payment or security deposit cleared.
The lender may compare the lease with what similar homes rent for. Some programs start with the lower number. Others can use a higher figure if their rules allow it and the records back it up. Ask which number applies before you count on a rent increase after closing.
What if the home is vacant?
For a home you plan to rent long term, some lenders can use an appraiser’s estimate of monthly market rent. The appraiser looks at similar homes and what tenants pay for them. Ask what the lender needs if the home is still vacant at closing. The rules can differ for a purchase and a refinance.
The appraiser may report market rent on a rent schedule or in the appraisal itself. If the lender asks for Fannie Mae’s standard Form 1007, that form calls for monthly lease comparisons. Ask what separate report the lender wants for short stays.
Can you use rent from short stays?
Some DSCR lenders can use Airbnb earnings or payout reports to calculate rent from past stays. Ask how many months the lender needs and whether it also wants proof of deposits. A property manager’s statement may also help if it shows the home, the dates, and the amounts.
Download your Airbnb earnings report for the listing you’re financing. The report shows earnings before fees and what Airbnb paid out. Ask which figure the lender uses.
If the home has little or no rental history, ask whether the lender accepts a forecast for your type of loan. Some will consider an approved report on an eligible purchase. That report may look at nightly rates and how often similar homes are booked. Others may ask for a long-term rent estimate.
If you have more than one rent report, ask how the lender will compare them. Some programs use the lowest figure the records support. A lender may also average income across busy and slow months or reduce the amount for costs such as cleaning and management. Ask which number it will use for your loan.
Check whether you can rent the home as planned. If the home is inside the City of Beaufort, check the city’s short-term rental rules for that address. For a home in a condo or HOA, ask for its rental rules as well. Tell the lender if you plan to stay there yourself so it can check whether the loan fits that use.
How much can the rent number change your DSCR?
Suppose the seller expects $2,400 a month, but the lender uses $2,100 from the signed lease. If the housing costs used in the loan review are $2,000 a month, here’s what changes.
- At $2,400 in rent, the ratio would be 1.20.
- At $2,100 in rent, the ratio would be 1.05.
Ask what ratio your loan requires. Then run your own budget for repairs, time without a tenant, and any other costs you’ll pay as the owner. You can use our DSCR calculator to try different rent and payment amounts.
What should you send before you count on the rent?
Start with the address, whether you’re buying or refinancing, and how you plan to rent the home. Share the signed lease if there is one. For a short-stay rental, tell us whether you have records of rent already collected or only a forecast. Ask which monthly rent the lender would use and what proof it still needs.
More help with your rental numbers
Let us help you run your rental numbers
We’ll start with the rent. Is it in a lease, does it come from past bookings, or is it an estimate? Bring us what you have. We can help you sort out which number may count and what you may need to show the lender.
General education. Loan terms and eligibility depend on a full review. Beaufort Lending, NMLS #1703543. Equal Housing Opportunity.