Both DSCR and conventional loans can finance investment properties — but they're built for completely different borrowers. Here's a full side-by-side breakdown so you can choose the right product for your deal.
The Core Difference
Conventional investment loans qualify you on your personal financial profile — W-2 income, tax returns, and debt-to-income ratio. DSCR loans qualify you on the property's financial profile — rental income vs. mortgage payment. That single distinction determines which product fits which investor.
Full Comparison
| Factor | DSCR Loan | Conventional |
|---|---|---|
| Income documentation | None required | W-2s + 2 years tax returns |
| Qualifying method | Property cash flow (DSCR) | Personal debt-to-income ratio |
| Self-employed friendly | Yes — no tax return review | Difficult — write-offs hurt DTI |
| LLC / entity borrowing | Yes — same rate | No — personal name only |
| Investment property limit | Unlimited | 10 financed properties max |
| Average close time | ~21 days | 30–45 days |
| Rate vs. baseline | +0.5–1.5% premium | Baseline rate |
| Min. credit score | 620 FICO | 620 FICO (Fannie/Freddie) |
| Down payment | 20–25% | 15–25% |
| Sold on secondary market | Private investors | Fannie Mae / Freddie Mac |
When to Choose a DSCR Loan
- You're self-employed and your tax returns understate your actual income
- You already have 10+ financed properties and hit the conventional limit
- You want to close in an LLC for asset protection
- You want a faster, simpler process without income documentation
- You're a foreign national without U.S. income history
- The deal makes sense on its own — rent clearly covers the payment
When to Choose a Conventional Loan
- You're a W-2 employee with clean, documentable income
- You have fewer than 10 financed properties
- You want the absolute lowest rate available
- You have a high DTI that would hurt you on a DSCR at lower LTV
- The property's rent doesn't clearly cover the payment (DSCR below 1.0)
The Rate Premium Question
The most common objection to DSCR loans is the rate — typically 0.5–1.5% higher than conventional. Here's how to think about it:
If you can qualify for a conventional loan at 7.0%, and a DSCR loan costs 7.75%, the conventional loan saves you money over the life of the loan. On a $400,000 mortgage, that's roughly $200–250/month — meaningful.
But if you're self-employed and a conventional lender qualifies you on $60,000 of AGI after write-offs when you actually earn $180,000, the conventional loan doesn't exist as an option. A DSCR loan at 7.75% beats a denial every time.
Bottom line: Use conventional when you can qualify and want the best rate. Use DSCR when conventional doesn't work — which, for most serious investors, is most of the time.
Can You Use Both?
Many portfolio investors use both products strategically. Conventional for primary residence and early investment properties where income qualification is clean. DSCR for acquisition #5 through #50+ where the deal math is more important than documentation simplicity.
If you're not sure which fits your current deal, use the DSCR calculator to check your ratio first. I'll tell you which product makes sense on the first call.