Which loan is right for your investment property deal? Here is a side-by-side comparison of DSCR and conventional financing.
Both DSCR loans and conventional investment property loans can be used to finance rental properties — but they work very differently. Conventional loans are based on your personal income, DTI, and employment. DSCR loans are based on the property rental income. Understanding the differences helps you choose the right product for your deal and your portfolio strategy.
Conventional loans require full income documentation — W-2s, tax returns, pay stubs, and a DTI calculation that includes all your debts. DSCR loans require none of this. If the property generates enough rent to cover the mortgage, you can qualify — regardless of your personal income or employment status.
Conventional investment property loans count the new mortgage against your personal DTI, which is typically capped at 43-50%. If you already have multiple mortgages, your DTI can quickly become a barrier. DSCR loans have no personal DTI calculation — each property qualifies independently.
Conventional loans are subject to conforming loan limits (currently $806,500 in most markets). Jumbo conventional loans exist but have stricter requirements. DSCR loans are portfolio products with no conforming loan limit — available up to $3.5M and beyond on select programs.
Conventional loans almost never allow entity vesting — you must take title in your personal name. DSCR loans can close in the name of an LLC, LP, corporation, or trust. This is a major advantage for investors who want liability protection.
Conventional guidelines limit you to 10 financed properties (Fannie/Freddie). DSCR loans have no such limit — you can hold as many DSCR loans as your portfolio supports. This makes DSCR loans the preferred choice for investors with large portfolios.
Conventional investment property rates are typically lower than DSCR rates by 0.5%-1.5%. If you can qualify conventionally (W-2 income, low DTI, under 10 properties), conventional financing may offer a better rate. DSCR is worth the slight rate premium for investors who cannot or do not want to qualify conventionally.
Both conventional and DSCR loans typically require 20-25% down for investment properties. Some conventional programs allow 15% down with PMI. DSCR programs generally require 20% minimum. The down payment requirements are similar.
Use conventional if: you have W-2 income, low DTI, fewer than 10 financed properties, and want the lowest possible rate. Use DSCR if: you are self-employed, have complex income, hold properties in an LLC, have 10+ financed properties, or want to scale without personal income constraints.
It depends on your situation. Conventional is better if you have W-2 income, low DTI, and fewer than 10 properties — you will get a lower rate. DSCR is better if you are self-employed, have complex income, hold properties in an LLC, or want to scale beyond conventional loan limits.
Yes. Many investors use conventional loans for their first few properties (to get the lower rate) and then switch to DSCR loans as they scale beyond conventional limits or as their income situation becomes more complex.
Typically 0.5%-1.5% higher. The rate premium reflects the non-QM nature of the product. For many investors, the ability to qualify without personal income documentation and close in an LLC is worth the slight rate difference.
Yes. If you currently have a conventional investment property loan and want to pull cash out, close in an LLC, or simplify your qualification, a DSCR refinance may make sense. We will run the numbers to see if it makes financial sense for your deal.
Conventional guidelines (Fannie/Freddie) limit you to 10 financed properties. Once you hit that limit, DSCR loans are one of the primary options for continuing to scale your portfolio. DSCR loans have no hard cap on the number of properties you can finance.
Talk to Steve or Zach today for a free consultation, no credit pull required.