DSCR Loan vs Conventional Investment Property Loan

When financing an investment property, two of the most common options are DSCR loans and conventional investment property loans. Both are mortgages for rental properties, but they differ significantly in how they qualify, their terms, and who they're best for.

Quick Comparison

• DSCR loan — Qualifies based on the property's cash flow (DSCR). No personal income verification. Typically higher rate and down payment. Best for investors with complex finances or multiple properties.
• Conventional loan — Qualifies based on the borrower's personal income and debt-to-income ratio. Typically lower rate and down payment. Best for investors with straightforward W-2 income.

DSCR Loan

• Qualification: Based on the property's DSCR (Net Operating Income ÷ Annual Debt Service). No personal income verification required.
• Minimum DSCR: Typically 1.0–1.25.
• Down payment: Typically 20–25%.
• Interest rate: Typically 0.5–1.5% higher than conventional.
• Entity: Typically made to an LLC.
• Property types: 1–4 unit residential rental properties (some lenders offer multifamily/commercial).
• Speed: Often faster to close than conventional.

Conventional Investment Property Loan

• Qualification: Based on the borrower's personal income, debt-to-income ratio, credit, and the property's cash flow.
• DTI requirement: Typically 43% or lower (including the new mortgage).
• Down payment: Typically 15–25%.
• Interest rate: Typically lower than DSCR loans.
• Entity: Typically made to an individual (not an LLC).
• Property types: 1–4 unit residential rental properties.
• Documentation: Requires W-2s, tax returns, and full income documentation.

Key Differences

• Qualification: DSCR qualifies on the property; conventional qualifies on the borrower's income.
• Rate: Conventional is typically cheaper.
• Down payment: DSCR typically requires more down.
• Entity: DSCR allows LLC ownership; conventional typically requires individual ownership.
• Scalability: DSCR allows investors to scale without being limited by personal DTI.
• Documentation: DSCR requires less personal documentation.

Which Is Right for You?

• Choose DSCR if: You're self-employed, have multiple properties, want to invest through an LLC, or your personal income is complex or hard to document.
• Choose conventional if: You have straightforward W-2 income, want the lowest rate, are buying your first investment property, or don't need LLC ownership.

Next Step

If you're financing an investment property, submit your information for a review, or read our DSCR loans guide.