DSCR Loan vs Conventional Loan for an Investment Property

A conventional investment-property loan qualifies you: your income, your tax returns, your debt-to-income ratio, and it stops at 10 financed properties. A DSCR loan qualifies the property: if the rent covers the payment 1.05 times, you’re approved, and it closes in an LLC. Conventional usually prices lower. DSCR is usually easier to get and to repeat.

That’s the trade in one paragraph. The rest is the detail that decides which side of it you’re on.

Side by side

	Conventional (Fannie Mae rules shown)	DSCR loan (our program)
What’s underwritten	Your income and debts	The property’s rent against its payment
Income documents	Tax returns, W-2s or business returns	None. No W-2s, pay stubs or tax returns
Minimum ratio	Debt-to-income limit	1.05x DSCR
Borrower	You, as an individual	An LLC or corporation, with your personal guarantee
Property count	Up to 10 financed properties	No count limit on this program
Minimum credit score	Set by the agency and lender	660
Max LTV, purchase	Set by the agency and lender	80% (75% cash-out)
Loan size	Agency loan limits	$75,000 to $2,000,000
Typical cost	Usually lower	Usually higher

Qualifying on rent instead of returns

Conventional underwriting takes the rental income off your tax returns. Fannie Mae’s rental income rules lean on Schedule E (or Form 8825 for a partnership or S corp), and leases only in specific cases, like a property bought after your last return. That’s fair to a W-2 earner. It’s rough on a full-time investor, because Schedule E is after depreciation, repairs and every other write-off your accountant found. The return that saves you tax is the same return that makes you look like you can’t afford another mortgage.

A DSCR loan skips that. On a $2,100 rent and a $1,900 PITIA, the ratio is $2,100 ÷ $1,900 = 1.11, and that’s the test. Your other rentals, your car payment and your Schedule E never enter it. The DSCR calculator runs that check on your own numbers.

The 10-property limit

Fannie Mae caps a borrower at 10 financed properties on second-home and investment-property loans run through its Desktop Underwriter system. The count is of 1-4 unit residential properties where you’re personally obligated on the mortgage, and it includes the home you live in. A two-unit property counts as one. Commercial property and buildings of five or more units don’t count.

So an investor who owns a financed home and nine financed rentals is at 10 and can’t get another conventional investment loan through DU, however good the numbers. The DSCR program has no such count.

The LLC question

Fannie Mae buys loans made to “borrowers who are natural persons,” per Selling Guide B2-2-01, with narrow exceptions such as certain trusts. An LLC isn’t one of them. If you want the property titled in an LLC, conventional financing generally means buying in your own name and moving title later, which raises due-on-sale questions covered in our LLC guide.

The DSCR program requires the opposite. The borrower has to be an LLC or corporation, and you sign a full-recourse personal guarantee.

Speed

Income underwriting is the slow part of a conventional file: transcripts, two years of returns, explanations for every large deposit. A DSCR file has fewer moving parts (appraisal with a rent schedule, credit, entity documents, bank statements for funds to close), so it usually moves faster. The appraisal and title still take what they take, and no lender controls those.

The cost

Expect a conventional loan to price lower than a DSCR loan on the same property, often meaningfully lower. The agencies’ guarantee is worth something, and you’re paying for the flexibility in a DSCR loan. We don’t print rates; they change daily, and a typed rate is stale by the time you read it.

The practical way to think about it: if you qualify conventionally, have fewer than 10 financed properties and don’t need an LLC at closing, get a conventional quote and compare. If any of those three fails, the comparison is moot. Then the question is how the DSCR terms on the DSCR loans page fit your deal.