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Conventional investment financing is cheaper. DSCR is faster, more flexible, and does not stop working at property ten. The honest answer to which is better depends on four things about your situation, and for most investors the answer changes over time.
Side by side
| Conventional investment | DSCR | |
|---|---|---|
| Qualifying basis | Personal debt-to-income | Property rent ÷ PITIA |
| Income documents | 2 years returns, W-2s, pay stubs, 4506-C | None |
| Rate | Lower | +50 to +150 bps |
| Down payment | 15–25% | 20–25% |
| Credit floor | 620–640 | 620–660 |
| Vesting | Individual name only | LLC, corporation, LP, or personal |
| Financed property cap | 10 | None |
| Reserves | 2–6 months per property | 2–12 months of subject PITIA |
| STR income | Rarely usable | Usable with history or projection |
| Prepayment penalty | None | Usually 3–5 year step-down |
| Typical close | 45–60 days | 10–21 days |
| Self-employed friction | High | None |
Four questions that decide it
1. Do your tax returns show the income?
This is the question that sends most investors to DSCR, and it is not about earning too little. It is about depreciation, cost segregation, and Schedule E losses doing exactly what your CPA designed them to do. A borrower with $340,000 of gross rents and an excellent life can show a paper loss that no DTI calculation survives. DSCR does not look.
2. How many financed properties do you own?
Fannie Mae permits up to ten financed properties, and the guidelines tighten materially after four. Investors who intend to keep buying past that point end up on DSCR eventually, and there is an argument for building the lender relationship before you need it.
3. How fast do you need to close?
If you are competing against cash offers, forty-five days is not a competitive term. A ten-to-fourteen-day close is worth real money on the purchase price — frequently more than the rate premium costs over a three-year hold.
4. Do you need the property in an entity?
Conventional financing requires individual vesting. If liability separation matters to you, or if you have partners, or if a lender will require entity vesting later anyway, DSCR does it at closing rather than through a post-closing transfer with due-on-sale exposure.
Where conventional clearly wins
- You are a W-2 borrower with clean returns, own fewer than four properties, and are not in a rush.
- You want the loan on your first or second rental and have no near-term plan to scale.
- You may sell inside three years and want no prepayment penalty.
- The property will not clear a 1.00 DSCR and you would rather not pay sub-1.0 pricing.
Where DSCR clearly wins
- You are self-employed, or your returns show aggressive write-offs.
- You own five or more financed properties, or intend to.
- You need to close in under three weeks.
- You need entity vesting from day one.
- The property is a short-term rental whose income conventional will not count.
- You are a foreign national or ITIN borrower.
Most portfolios use both
The pattern we see most often: conventional financing on the first two or three properties while the tax returns still cooperate, then a switch to DSCR as write-offs accumulate and the count climbs. There is no reason to be doctrinaire about it. Take the cheaper capital where you qualify for it, and take the flexible capital where you do not.
Get both numbers
Tell us the deal and your situation. If conventional is genuinely better for you, we will say so.
Get a term sheet Run the numbersComparisons reflect common market practice and are not specific to any lender's current guidelines, which change frequently. Not a loan commitment.