Two Different Tools for Investment Property Financing

DSCR loans and conventional investment property loans both finance residential rental properties, but they're built for different investor profiles. Understanding the trade-offs clearly helps you choose the right tool for each transaction.

Head-to-Head Comparison

Income Documentation

• DSCR: No personal income required. Qualification based on property's rental income vs. mortgage payment.
• Conventional: Full personal income documentation: 2 years tax returns, W-2s, pay stubs. All existing rental income and expenses are factored into DTI.

Winner for most investors: DSCR — especially for self-employed or those with complex taxes.

Property Limits

• DSCR: No limit on financed properties. You can have 20, 50, or 100 DSCR loans simultaneously.
• Conventional (Fannie Mae): Maximum 10 financed properties for an individual investor.

Winner for scaling investors: DSCR, clearly.

Interest Rate

• DSCR: Typically 0.75-1.5% higher than comparable conventional investment property loans
• Conventional: Lower rate; conforming product with agency backing

Winner: Conventional — but the gap is often worth paying for DSCR's advantages.

Entity Vesting (LLC Ownership)

• DSCR: Fully supports LLC, corporation, and trust vesting
• Conventional (Fannie Mae): Does not allow entity vesting; must be individual name only

Winner for liability protection: DSCR.

Closing Speed

• DSCR: 21-35 days typical
• Conventional: 45-60 days typical

Winner: DSCR.

Minimum Down Payment

• DSCR: 20-25% minimum
• Conventional investment property: 15-25% depending on unit count and program

Winner: Roughly equivalent; conventional may allow 15% on single-family in certain programs.

Prepayment Penalties

• DSCR: 3-5 year step-down prepayment penalty (most programs)
• Conventional: No prepayment penalty

Winner: Conventional.

When to Choose DSCR

• You're self-employed or have complex tax returns
• You already own 4+ financed properties
• You want LLC vesting
• You need to close in less than 35 days
• You own short-term rentals
• You're actively scaling and plan to add 5+ properties per year

When to Choose Conventional

• You have strong W-2 income and a clean, simple tax return
• You own fewer than 4 investment properties and plan to stay below 10 total
• Minimizing interest rate is your top priority
• You plan to sell or refinance within 2-3 years (no prepay penalty risk)
• You don't need LLC vesting