DSCR vs Conventional investment loan — 2026.
Which one wins for short-term rentals, self-employed investors, and scaling beyond 10 properties?
Pick DSCR if…
- You're self-employed and write off heavily
- Buying a short-term rental (Airbnb / VRBO)
- Already own 10 financed properties (Fannie cap)
- Want to close in an LLC
- Building a portfolio quickly
Pick Conventional if…
- W-2 employee with strong taxable income
- Buying a long-term rental (12-month lease)
- Want the lowest possible rate
- Buying property #1–10 in your portfolio
- Plan to refinance or sell within 3 years
Full feature comparison
| Feature | DSCR | Conventional Investment |
|---|---|---|
| Qualification basis | Property's rental income (DSCR ratio) | Your personal income (W-2, tax returns) |
| Income documentation required | None — no W-2s, no tax returns, no pay stubs | Full income documentation, 2 years tax returns |
| Down payment (investment) | 20–25% typical | 15–25% depending on units & credit |
| Minimum credit score | 660–680 typical | 620 minimum / 680+ for investment |
| Interest rate (vs conventional) | 0.75%–1.50% higher | Lowest available for investment |
| DTI ratio | Not calculated | Capped at 45–50% |
| Properties owned limit | Unlimited | Capped at 10 financed (Fannie Mae) |
| Closing in LLC | Allowed by most lenders | Generally not allowed |
| Short-term rental income | Allowed — uses market rent or AirDNA / projected | Generally not allowed for qualifying |
| Prepayment penalty | Often 3–5 year prepay penalty | No prepayment penalty |
| Best for | Investors scaling a portfolio, self-employed, STR properties | W-2 employees with strong income buying 1–10 rentals |
DSCR vs Conventional FAQs
What is the DSCR ratio?+
DSCR (Debt Service Coverage Ratio) = monthly rental income ÷ monthly PITIA (principal + interest + taxes + insurance + HOA). A DSCR of 1.0 means rent exactly covers the payment. Most lenders want 1.0–1.25 minimum; some allow as low as 0.75 with a rate adjustment.
Are DSCR loans really 'no income verification'?+
Correct — the loan is qualified entirely on the property's rental income. The lender never asks for your tax returns, W-2s, pay stubs, or DTI. They will pull credit, verify assets for down payment + reserves, and order an appraisal with a rent schedule (Form 1007).
Why are DSCR rates higher than conventional?+
DSCR loans are funded by non-QM (non-qualified mortgage) lenders rather than Fannie Mae or Freddie Mac. The trade-off for skipping income verification is a rate premium of roughly 0.75%–1.50% over a conventional investment loan.
Can I refinance a conventional investment property into a DSCR loan?+
Yes. This is a common move once an investor hits the Fannie Mae 10-property cap or experiences an income event (career change, retirement) that makes conventional qualifying harder. The DSCR refi unlocks more borrowing capacity.
Do DSCR loans work for short-term rentals (Airbnb/VRBO)?+
Yes — and this is one of the biggest reasons investors choose DSCR. Conventional loans use long-term lease rent only, which can disqualify a profitable STR. DSCR lenders accept short-term rental projections from AirDNA or the appraiser's STR rent schedule.
Can I close a DSCR loan in my LLC?+
Yes — almost all DSCR lenders allow (and often prefer) closing in an LLC. This provides liability separation and simplifies bookkeeping. Conventional loans generally require closing in your personal name.
Investors: get both quotes
We'll price DSCR and Conventional side-by-side so you can compare cash flow on your next deal.