If you are buying your next rental and trying to decide between a DSCR loan and a conventional investment property mortgage, the honest answer is “it depends on where you are in your investing career”. This post breaks down the real differences so you can pick the right product for the specific deal in front of you. For the full DSCR walkthrough, see the complete DSCR loan guide.
The one sentence difference
A conventional investment property loan underwrites you as the borrower. A DSCR loan underwrites the property. That single difference drives everything else.
When a lender underwrites you, they want tax returns, pay stubs, bank statements, a full income picture, and a debt to income (DTI) ratio below 43% to 50%. When a lender underwrites the property, they want an appraisal with a 1007 rent schedule and a calculation that shows the rent covers PITIA. Your W2 income can be zero and the DSCR loan still closes as long as the property math works.
Rates and terms comparison
In 2026, both products are 30 year fixed rate loans in the 7s to low 8s, but DSCR is typically priced 0.75 to 1.5 points above conventional. For a $200K loan, that is roughly $100 to $200 more per month in interest. Over a 30 year hold, that adds up, but most investors do not hold a single DSCR loan for 30 years because they refinance into the next deal.
Conventional investment property loans cap at 75% to 85% LTV for a purchase depending on the number of units and your FICO. DSCR caps at 75% to 80% on a purchase and 70% to 75% on a cash out refinance. The down payment requirement is roughly similar, though the exact tier depends on property type and DSCR ratio.
Conventional has no prepayment penalty. DSCR loans often do, usually 3 or 5 year step down structures. If you are planning to refinance inside the prepay window, that cost needs to be part of your underwriting.
Conventional closing timelines are typically 35 to 45 days. DSCR is typically 21 to 30 days. The time difference matters when you are competing against cash offers or working through a hard money bridge.
When conventional wins
Your first one or two rentals. If you have a W2 job, a clean tax return, and a debt to income ratio under 43%, conventional is almost always cheaper. Use it until it stops working.
Owner occupied house hacks. If you are buying a 2 to 4 unit property and living in one of the units, you get to use owner occupied conventional financing, which is cheaper than any investment product (DSCR or otherwise). This is one of the most tax efficient ways to build your first multi unit, and it does not require DSCR at all.
You want zero prepayment penalties. Conventional loans have no prepay, so if you are the kind of investor who refinances aggressively, conventional saves you the prepay cost. The rate savings compound this.
You have clean, rising Schedule E income. In the first couple of years of investing, your rental income on Schedule E might still be positive. Once depreciation starts hitting, Schedule E typically goes paper negative, and conventional underwriters start penalizing you. At that point DSCR takes over.
When DSCR wins
You are past the Fannie ten loan cap. Fannie Mae only allows ten financed properties in your name. Freddie has similar limits. Once you hit that cap, conventional is done for you, full stop. DSCR has no cap.
Your tax returns show paper losses from depreciation. Real estate investors love depreciation. Conventional underwriters hate it. After a few years of cost seg studies and bonus depreciation, your AGI can look like you are broke even though your cash flow is strong. DSCR does not care. The property math is the math.
You want to close in an LLC. Conventional loans close in personal name. You can quit claim into an LLC after closing, but that technically triggers the due on sale clause, and some lenders enforce it. DSCR loans close directly in an LLC from day one. For the LLC specifics, see DSCR loans for LLC held rental property.
You are self employed with variable income. Self employed borrowers get murdered on conventional DTI calculations because lenders use 24 months of averaged income and deduct business expenses aggressively. DSCR skips that whole fight.
You need to close fast. DSCR can close in 21 days because there is no income review. Conventional typically runs 35 to 45 days. Speed matters on competitive offers.
The comparison table
| Feature | Conventional | DSCR |
|---|---|---|
| Borrower income review | Yes, heavy | None |
| DTI requirement | Typically 43% to 50% max | Not applicable |
| Schedule E paper losses | Hurt you | Irrelevant |
| Max loans | 10 (Fannie) | Unlimited |
| LLC vesting | Technically no, workarounds exist | Yes, native |
| Typical rate (2026) | 6.5% to 7.5% | 7.25% to 8.5% |
| Typical LTV (purchase) | 75% to 85% | 75% to 80% |
| Typical LTV (cash out refi) | 70% to 75% | 70% to 75% |
| Prepayment penalty | No | Often 3 to 5 years |
| Typical close time | 35 to 45 days | 21 to 30 days |
| FICO minimum | 620 to 640 | 660 to 680 |
| Reserves | 2 to 6 months | 6 to 12 months, portfolio wide |
How to pick for your next deal
The mental model I use: conventional is the default for the first two doors and for any deal where I can actually qualify on income without Schedule E problems. Once the portfolio hits three doors, my tax returns start looking weird to conventional underwriters because of depreciation, and I move to DSCR for everything after that.
A couple of other tiebreakers. If the deal is going into an LLC, DSCR. If I am refinancing a BRRR property and my cash is stuck in the deal, DSCR (conventional cash out refinances have tighter seasoning and lower LTV). If I am closing against a cash competitor and speed matters more than rate, DSCR.
The DoorVault angle
Once you have both conventional and DSCR loans in your portfolio, tracking them becomes the problem. Rate, term, DSCR at origination, current DSCR, next payment, escrow changes, prepay window, cash out LTV available if you refinanced today. DoorVault tracks all of that per loan and rolls it up to the portfolio level. See the loans dashboard feature and the mortgage intelligence module for how that actually works.
FAQ
Can I refinance a conventional loan into a DSCR loan later?
Yes, this is common. Investors often start with conventional to get the lower rate, then refinance into DSCR when they want to move into an LLC or when their Schedule E stops qualifying them.
Do DSCR loans have higher closing costs than conventional?
Slightly. Origination points are often 1 to 2% on DSCR versus 0 to 1% on conventional, and underwriting fees are higher. For a $200K loan the total closing cost difference is usually $2,000 to $4,000.
Can I get a DSCR loan on a duplex, triplex, or quad?
Yes. DSCR is available on 1 to 4 unit residential properties with some lenders going up to 8 or 10 units before you cross into commercial territory. Most 2 to 4 unit DSCR loans follow the same guidelines as single family, just with combined rent on the numerator.
Ready to model both side by side?
Use the DSCR calculator to model the property cash flow against both loan types. For the full DSCR playbook, go back to the pillar guide. Track every loan across your portfolio at https://doorvault.app.
