When you buy or refinance a rental, you will usually choose between a conventional loan and a DSCR loan. They solve the same problem differently. Here is how to decide.
The core difference: whose income counts
A conventional loan is underwritten on you: your income, employment history, tax returns and debt-to-income ratio. A DSCR loan is underwritten on the property: how its rent compares with its payment. See what a DSCR loan is for the basics.
Side by side
| Conventional | DSCR | |
|---|---|---|
| Qualifies on | Your personal income and debts | The property’s rental income |
| Income documents | Tax returns, W-2s, pay stubs | Generally none |
| Number of properties | Often limited as your portfolio grows | Less affected by how many you own |
| Close in an LLC | Often not allowed | Commonly allowed |
| Typical rate | Generally lower | Generally higher |
| Down payment | Can be lower | Often higher |
| Speed and paperwork | More documentation, slower | Less documentation, often faster |
When a conventional loan makes sense
- You have strong, easily documented W-2 income and few properties.
- You want the lowest possible rate and are fine providing full income documentation.
- You plan to hold the property in your personal name.
When a DSCR loan makes sense
- You are self-employed or your tax returns do not show your real earning power.
- You already own several properties and are hitting conventional limits.
- You want to buy in an LLC and keep the deal separate from your personal finances.
- You need to close fast and keep documentation light.
The cost question
DSCR loans usually carry a higher rate than conventional financing. Many investors accept that tradeoff for speed, simplicity and scalability — and refinance later if their situation changes. What matters is the whole picture: rate, fees, down payment, prepayment terms and how the loan fits your plan.
See where your deal lands
Use the DSCR calculator to check your ratio, then the estimator for a ballpark. A loan officer can compare options for your specific property.