DSCR Loan vs Conventional Investment Loan
Investors typically choose between two underwriting paths for a rental purchase or refinance: a conventional Fannie/Freddie loan that qualifies you on personal income, or a DSCR loan that qualifies on the property's rental cash flow. The trade-off is rate (conventional wins) versus simplicity and scaling (DSCR wins).
DSCR Loan
Qualify on property cash flow, not personal income.
Best for: Investors with multiple rentals, complex tax returns, or self-employment income.
Pros
- +No personal income docs or tax returns
- +No DTI calculation — unlimited financed properties
- +Closes in LLC, faster underwriting
- +30-year fixed available; same loan structure as conventional
Cons
- −Rate typically 1–2% above conventional
- −Higher origination fee
- −Property must DSCR (rent must cover payment)
Conventional Investment Loan
Standard Fannie/Freddie financing using your personal income.
Best for: Investors with strong W-2 income, clean tax returns, and fewer than 10 financed properties.
Pros
- +Lowest rates on the market for investment loans
- +30-year fixed at conforming rate + 0.5–1%
- +Lower fees than DSCR
Cons
- −Hard 10-property cap (Fannie) or 6-property cap (Freddie)
- −Full income docs: 2 years tax returns, W-2s, pay stubs
- −DTI must stay under 45–50% across all properties
- −Slower underwriting — 30–45 days typical
| Field | DSCR Loan | Conventional Investment Loan |
|---|---|---|
| Min FICO | 660+ | 680+ (720+ for best pricing) |
| LTV (purchase) | Up to 80% | Up to 85% |
| LTV (cash-out) | Up to 75% | Up to 75% |
| Income docs | DSCR (rent vs payment) | Personal DTI from tax returns |
| Term | 30-year fixed, IO options | 30-year fixed |
| Time to close | 21–30 days typical | 30–45 days |
Which one should you choose?
- DSCR Loan: choose DSCR if you are scaling past 4–10 properties, are self-employed with high write-offs, or want to close in an LLC.
- Conventional Investment Loan: choose conventional if your tax returns clearly show qualifying income, you have under 4 properties, and want the lowest possible rate.
- Either works for first-time investors with W-2 income at a single rental — run both scenarios and pick on rate.
Frequently asked questions
Can I refinance a DSCR loan into a conventional loan later?
Yes. DSCR loans have no prepayment-driven seasoning issue (most have 1–5 year prepay penalties, but no seasoning required for a refi). After 6–12 months of seasoning, you can refinance into a conventional loan if your personal qualifying picture allows.
Why are DSCR rates higher?
DSCR loans are non-QM products held by private capital, not securitized through Fannie/Freddie. The capital pool prices for the higher abandonment risk that comes with non-recourse, business-purpose lending.
Can a conventional investment loan close in an LLC?
Generally no. Fannie/Freddie require title in the borrower's name. You can transfer to LLC after close, but lenders may flag it as a violation of the due-on-sale clause.
Which has lower closing costs?
Conventional. DSCR origination fees run 1.5–2.5 points typical; conventional usually 0.5–1 point.
Not sure which fits your scenario?
Tell us the deal — we'll come back with the right product and current pricing.
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