Mortgage Glossary
Long-Term Rental (LTR)
A property leased on a monthly basis or longer — typically under a 12-month written lease.
What is a Long-Term Rental?
A long-term rental (LTR) is the classic landlord scenario: a tenant signs a written lease — almost always for at least 12 months — and pays a fixed monthly rent. The property is occupied by the same household for the full lease term, with renewals extending the relationship.
Compared to short-term rentals, long-term rentals produce lower gross rents per square foot but have substantially lower operating expenses — no per-stay cleaning, no platform commissions, no nightly turnover. Vacancy tends to be lower as well, since each unit only re-leases once per year at most.
For investor lending, the LTR rent is generally a known, stable number, which makes DSCR underwriting straightforward: take the lease amount or the appraiser’s market-rent estimate, divide by PITIA, and you have your ratio.
How Long-Term Rentals work at Total Quality Lending
On a Total Quality Lending DSCR loan for a long-term rental, the qualifying rent is the lower of (a) the appraiser’s estimated market rent from FNMA Form 1007 (single-family) or Form 1025 (2-4 unit small income property), and (b) the actual lease in place. This conservative standard means TQL won’t pretend a property earns more than the market can actually support.
When a tenant’s lease is above market rent, TQL will accept the higher number if it’s within 120% of market rent and the borrower can show two months of receipts proving the tenant has been paying it. For multi-unit DSCR loans (5–8 unit residential or 2–8 unit mixed-use), the same approach applies on a per-unit basis, with separate vacancy and commercial-unit rules layered on top.
FAQs
What's the difference between a long-term rental and a short-term rental?
A long-term rental is leased on a monthly basis or longer — typically under a 12-month written lease. A short-term rental is leased on a nightly, weekly, monthly, or seasonal basis, usually through platforms like Airbnb or VRBO. The underwriting treatment differs significantly.
Which rent amount does TQL use for a long-term rental DSCR loan?
TQL DSCR uses the lower of the estimated market rent (per FNMA Form 1007 single-unit or Form 1025 small income property) and the actual lease amount. This is the conservative approach — it ensures DSCR is calculated on rent the property can reliably support.
What if my lease is higher than market rent?
TQL DSCR will accept the higher lease rent if it falls within 120% of the appraiser's market rent estimate and the borrower provides two months of receipts evidencing the tenant has actually been paying that rent.