DSCR Direct

Conventional Loans for Investment Properties

Conventional loans are the most common financing option for investment properties. Backed by Fannie Mae and Freddie Mac, they offer competitive rates and predictable terms - but they come with strict qualification requirements that can limit investors.

To qualify for a conventional investment property loan, you typically need 20-25% down (sometimes more for multi-unit properties), full income documentation including W-2s, tax returns, and pay stubs, a debt-to-income ratio under 45%, and a credit score of at least 620. Fannie Mae also caps investors at 10 financed properties total, which becomes a hard wall for anyone building a portfolio.

The income documentation requirement is where most investors get stuck. Self-employed borrowers, LLC owners, and anyone who takes aggressive write-offs on their taxes will show lower qualifying income - even if their rental properties are cash flowing well. This creates the frustrating situation where your properties are profitable, but you can't qualify for more financing.

Compare to DSCR Loans

DSCR (Debt Service Coverage Ratio) loans solve the biggest problems investors face with conventional financing. Instead of qualifying based on your personal income, DSCR loans qualify based on the property's rental income. If the rent covers the mortgage payment, you qualify - it is that simple.

Here is how DSCR compares to conventional for investment properties:

• No income documentation - no tax returns, no W-2s, no pay stubs
• No property limit - finance your 11th, 20th, or 50th property
• Up to 85% LTV - as little as 15% down on some programs
• Faster closings - less paperwork means quicker underwriting
• Close in an LLC - conventional loans require personal names on title

DSCR rates are typically 0.5-1.5% higher than conventional rates, but for many investors the trade-off is worth it. If conventional requirements are holding you back - whether it is the income docs, the property cap, or the DTI ratio - DSCR may be the better option for your next deal.