Comparison · Investors
DSCR vs conventional investor loans
Successful investors are routinely declined by conventional lending for the same reason they are successful: aggressive depreciation makes a strong portfolio look like a weak income.
Should investors use a DSCR loan or conventional financing?
Conventional is cheaper on rate whenever your documented income supports it. DSCR wins when depreciation has reduced your taxable income, when you have hit the financed-property limit, or when you need to close without waiting on tax transcripts. The comparison is not rate against rate — it is cost against whether the file closes at all.
| DSCR | Conventional investor | |
|---|---|---|
| Qualifies on | The property's rent | Your personal documented income |
| Income documents | None | Tax returns, W-2s, pay stubs |
| Debt-to-income test | None | Yes, and it is binding |
| Financed property cap | None | Typically 10 |
| Vesting | LLC permitted | Usually personal name |
| Rate | Above agency | Lower |
| Prepayment penalty | Common, negotiable | None |
DSCR usually wins when
- Depreciation has reduced your documented income.
- You already hold the maximum number of financed properties.
- You want to hold title in an LLC.
- You need to close faster than income verification allows.
Conventional usually wins when
- Your tax returns show strong, stable income.
- You own only a few properties.
- You intend to sell or refinance soon and want no prepayment penalty.
- The rate difference outweighs the documentation burden.
Worked through
Price the prepayment penalty deliberately rather than by accident. Most DSCR loans carry one for the first few years, and a shorter penalty usually costs a little rate. If you plan to sell or refinance inside that window, buying the penalty down is frequently cheaper than paying it.
Frequently asked
Are DSCR rates much higher than conventional?
Higher, but the gap is narrower than most investors expect, and it varies substantially between lenders because these are portfolio products. Shopping a DSCR file properly matters more than shopping a conventional one.
How many properties can you finance conventionally?
Typically ten financed properties, after which agency guidelines stop. DSCR lenders impose no such cap, which is why most investors move to DSCR at that point regardless of income.
Can you refinance a DSCR loan into conventional later?
Yes, if your documented income supports it at that time. Some investors use DSCR to acquire quickly, then refinance into cheaper agency financing once the returns catch up.
Programs mentioned
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Still not sure which applies to you?
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