Tracey Howard

Rent, appraisal & DSCR

Know your numberbefore the lender does.

A rental loan comes down to two things: what the property is worth and what it rents for. Here's how both get measured.

How the debt-service coverage ratio works

DSCR = monthly rent ÷ monthly housing payment

The housing payment includes principal, interest, property taxes, insurance and any association dues.

If the rent equals the payment, the ratio is 1.00. If the rent is 20% more than the payment, it's 1.20. Many programs look for 1.00 or higher, and some allow less.

Illustration only. The ratio a lender uses, and the minimum it accepts, depend on the program.

How the appraiser decides the rent

  • Single-family rentals: the appraiser adds a market-rent analysis comparing at least three similar rentals, adjusted for location, size, condition and features, and concludes a market rent.
  • 2 to 4 units: a small-residential-income appraisal lists each unit's actual and market rent and includes an income approach alongside comparable sales.
  • Short-term rentals: the standard market-rent analysis measures long-term monthly rent, not nightly income. Programs that accept short-term rentals may use other documentation.

The appraisal forms used on loans sold to Fannie Mae and Freddie Mac are being redesigned, with the new format required starting November 2, 2026. The rent analysis is still there, in a new layout.

Helping your appraisal

  • Give the appraiser a list of improvements with dates and costs
  • Provide current leases and a rent roll
  • Make every unit accessible on inspection day
  • Finish the rehab before the appraisal, including trim and cleanup
  • Point out recent nearby sales and rentals you know about
  • Fix safety items: smoke detectors, handrails, missing covers

Run a deal with me

Send me the address and the rent. I'll tell you how it's likely to appraise, rent and finance.

Talk through a deal

Mortgage services are provided through Somerset Lending Corp, NMLS #133899. Tracey Howard, mortgage loan originator, NMLS #1107565. This page is general information, not a commitment to lend or a loan offer. Loan programs, eligibility and guidelines change and vary by lender, and all loans are subject to credit approval, property eligibility and underwriting. Nothing here is tax or legal advice. Equal Housing Opportunity.