Understanding Form 1007: A Key Step in Financing Investment Properties

Posted by : Moneek

If you’re planning to purchase or refinance an investment property, especially with the help of a mortgage, you may come across something called Form 1007, also known as the Single-Family Comparable Rent Schedule. But what is it—and why is it important?

What Is Form 1007?

Form 1007 is a standard document used by lenders to estimate the fair market rent of a single-family investment property. It’s typically completed by a licensed appraiser as part of the appraisal process.

The form includes a detailed breakdown of the subject property’s rental potential by comparing it to at least three similar rental properties in the area. This comparison helps the lender determine how much rental income the property is likely to generate.

Why Lenders Require It

When you’re buying or refinancing an investment property, the potential rental income can be a major factor in your loan approval. Lenders use the estimated rent from Form 1007 to:

Assess your ability to cover the mortgage payments
Calculate your debt-to-income (DTI) ratio
Determine the property’s cash flow potential

In short, Form 1007 helps lenders make more informed decisions about your loan application.

What Information Is Included?

Form 1007 includes:

A description of the subject property (location, size, features)
Rent estimates for at least three comparable properties
Adjustments for differences (like square footage, amenities, or location)
A final estimated market rent for the subject property

This rent estimate is then used by the underwriter to support the income analysis in your loan file.

Who Needs Form 1007?

Form 1007 is typically required for:

Conventional loans backed by Fannie Mae or Freddie Mac
Investment property purchases
Refinances where rental income is being used to qualify

It’s not required for primary residences or second homes unless you’re planning to use rental income to help qualify for the loan.

Form 1007 vs. Form 216

You might also hear about Form 216, which is the Operating Income Statement. While both forms deal with rental income, Form 1007 focuses on estimating potential rent based on market data, while Form 216 details actual income and expenses if the property is already rented. In many cases, both forms are used together.

Final Thoughts

If you’re diving into real estate investing, understanding Form 1007 is key. It not only supports your loan application but also gives you insight into how your property stacks up in the rental market.

Have questions about investment property financing or how rental income plays into loan approval? Reach out—I’m here to help make the process simple and straightforward.

Understanding Form 1007: A Key Step in Financing Investment Properties