DSCR loans vs. conventional loans
Both finance a rental. One qualifies you on your paperwork, the other on the property. Here is how to pick.
Choose DSCR if you are self-employed, your tax returns understate what you make, you already own several financed properties, or you want the title in an LLC. Choose conventional if you have W-2 income that documents cleanly, you own fewer than ten financed properties, and the lowest possible rate matters more than the paperwork.
Key differences at a glance
| Feature | DSCR loan | Conventional |
|---|---|---|
| Income documents | None, property income only | Tax returns, W-2s, pay stubs |
| Qualifies on | Property cash flow (the ratio) | Your personal debt-to-income |
| Rate | About 0.5–1.5% higher | Lowest available |
| Down payment | 20–25% | 15–25% for investment property |
| Properties financed | Up to 20 | Ten maximum |
| Typical closing | About 30 days | 30–45 days |
| Title in an LLC | Yes | Personal name only |
| Best for | Self-employed and portfolio investors | W-2 earners buying a first or second rental |
Choose DSCR when…
- You are self-employed and your returns do not reflect your real income
- You already own ten financed properties, or will soon
- You want the property titled in an LLC
- Your personal debt-to-income is already maxed out
- You want the least paperwork possible
Choose conventional when…
- You have steady W-2 income that documents well
- You own fewer than ten financed properties
- The lowest possible rate is the priority
- You do not mind the paperwork for a better rate
- Your debt-to-income has room for another property
- This is your first or second rental
Is the higher rate worth it?
DSCR rates usually run 0.5–1.5% above conventional. On a cash-flowing rental the gap is smaller than it sounds.
Collecting $3,500 a month in rent, the property still cash-flows either way. What you did not do: spend weeks gathering documents, explain your write-offs, or risk a denial on debt-to-income.
DSCR loans vs. conventional loans: FAQs
Yes, with conditions: a ratio above 1.0, a credit score above 700, six months of reserves, 12 months of verified housing history, no more than 80% loan-to-value, and you must already own your primary home. If you rent and this would be the first property you have ever owned, the first-time-homebuyer rules apply instead: 700 credit, 75% loan-to-value, $750,000 maximum and no interest-only. Conventional may offer a slightly lower rate, but DSCR skips the personal documentation.
Usually by about 0.5–1.5%. In exchange you skip the income file, close faster and have no personal debt-to-income limit. On a cash-flowing rental the difference is often a couple of hundred dollars a month.
Up to 20 financed properties per borrower, twice the conventional limit of ten, with a cap of ten loans or $5 million with us. Each property still has to meet the ratio.
Yes with DSCR. Conventional investment loans require you to hold title personally.
Not sure which fits? Ask Greg.
Describe the property and the plan. You get a recommendation, not a pitch.
Or call 609-992-5356 to reach Greg directly.
DSCR and Non-QM loans are arranged through third-party providers. Guidelines shown are typical program parameters and vary by program, property and borrower profile; your advisor confirms the terms for your scenario. This is not a commitment to lend. All loans subject to credit approval. Advisors Mortgage Group, LLC · NMLS #33041 · Equal Housing Opportunity.
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