How do lenders count rental income?
It depends on the loan you're using. The same rent check is treated one way on a conventional investment loan, where it gets added to your personal qualifying income, and another way on a DSCR loan, where the property's income carries the loan on its own. Knowing which path you're on tells you how much of the rent actually helps.
On a conventional loan, rental income may count toward qualifying, commonly using a 75% factor (to allow for vacancy and upkeep) plus Form 1007/1025 and a lease or appraisal. On a DSCR loan, the property's income is used directly through the debt-service-coverage ratio rather than added to your personal income. I'll figure out which path fits your file and tell you honestly how much of the rent will count, instead of assuming the best case. And a straight reminder: counting rental income to qualify is not the same as a promise the property will perform. Rents and vacancy can move, so I treat the rent as qualifying income, not a guaranteed result.
The conventional way: the 75% factor and Form 1007/1025
On a conventional loan, lenders commonly count about 75% of the gross rent rather than 100%, holding back roughly a quarter for vacancy and upkeep. The market rent is documented with a Form 1007 (one unit) or Form 1025 (2-4 units), usually alongside a lease or the appraisal.
The exact mechanics, how the 75% is applied, when a lease is required versus an appraisal estimate, and how it interacts with your debt-to-income ratio, are Fannie Mae and Freddie Mac rules covered on my conventional loan guide. I summarize them here and link rather than repeat them: see the conventional investment property guide for the precise treatment.
The DSCR way: the property's income used directly
On a DSCR loan, rental income isn't added to your personal income at all. Instead the property's income is compared directly to its total payment through the debt-service-coverage ratio: DSCR = rent divided by PITIA. The property qualifies on its own cash flow.
That's the whole point of DSCR, and it's why it fits investors whose personal returns understate their income or who have grown past the conventional financed-property limit. The DSCR mechanics, who it fits, what ratio programs look for, and the investor-overlay terms, live on the DSCR loan guide. The minimum DSCR and how a program treats a ratio below 1.0 are investor overlays I verify rather than quote.
Can projected rent count if the unit is vacant?
Often, yes, within the program's rules. You don't always need a signed lease in hand. On a conventional loan, an appraiser's market-rent estimate on Form 1007/1025 can support projected rent, subject to the agency guidelines. On a DSCR loan, a market-rent figure can feed the ratio.
How much projected rent counts, and what documentation a given program wants, depends on the loan and the property, so I confirm it for your file rather than assume. The point is that a vacant or about-to-be-rented unit isn't automatically disqualifying; it just changes how the rent is documented.
Qualifying a short-term rental with projected income
Yes, on some DSCR programs. When a short-term rental has no 12-month operating history, certain programs let you qualify using a projected-income report from a service like AirDNA instead of a signed lease. They attach conditions, commonly a minimum market or occupancy score, a minimum occupancy rate, nearby comparables, and a higher DSCR floor (often around 1.10 to 1.25). The property also has to be legally permitted as a short-term rental where it sits. Which program fits, and the exact thresholds, are confirmed per loan.
There are two ways a program may let a short-term rental's income qualify, and which is available varies by program:
- Projected income (an AirDNA-type report). For a new or unseasoned short-term rental with no rental history, some programs accept a projected-income report that estimates market revenue from nearby comparable listings. It is a qualifying input the lender uses, not a forecast of what you will earn.
- A 12-month operating history. For a seasoned short-term rental, programs can use the property's actual trailing income, often documented with statements or a property-management report. A seasoned history can price better than projected income on some programs.
The conditions a program attaches to projected short-term-rental income vary, but commonly include a minimum market or occupancy score, a minimum occupancy rate, a set of nearby comparables, a higher minimum DSCR (often around 1.10 to 1.25 rather than 1.0), and sometimes a purchase-only restriction. These are ranges, not universal requirements.
One caveat I state plainly: the property has to be legally permitted as a short-term rental in its location, and programs often require proof of the short-term-rental license or permit. A rental that isn't allowed where it sits can't be qualified this way, no matter what a projection shows. The full DSCR program rules, including the short-term-rental overlays, live on the DSCR loan guide. Which program fits and the exact thresholds vary by program, confirmed per loan.