Both finance rental property. A conventional loan qualifies you on your income and usually costs less; a DSCR loan qualifies the property on its rent and asks less about you.
Side by side
| DSCR loan | Conventional loan | |
|---|---|---|
| How you qualify | The property’s rent against its housing cost | Your income and debts (debt-to-income) |
| Income documents | None for income: no tax returns or W-2s | Tax returns, W-2s or other income proof |
| Pricing | Higher, and better as the ratio rises | Usually lower when you qualify |
| Closing in an LLC | Yes | No, in your own name |
| Number of properties | Generally no set cap | Capped financed properties |
| Short-term rentals | Many programs count booking income | Harder to count |
| Prepayment penalty | Common, and negotiable | None |
When a DSCR loan fits
- Your tax returns show less income than you earn, or you’d rather not use them.
- You want to close in an LLC.
- You’ve reached the conventional limit on financed properties.
- The property is a short-term rental.
When a conventional loan fits
- Your income qualifies comfortably on paper.
- You want the lowest cost and no prepayment penalty.
- You own only a few financed properties.
- You don’t need an LLC on title.
Guides and calculators
Questions
Is a DSCR loan more expensive than a conventional loan?
Usually, yes: the rate and fees are higher, and many DSCR loans have a prepayment penalty. You’re paying for qualifying without income documents, an LLC on title and no property cap.
Can I switch from DSCR to conventional later?
Yes, by refinancing once your income qualifies, as long as the prepayment penalty has run its course or you’re willing to pay it.
Which is easier to qualify for?
It depends on what’s strong: strong income favors conventional; a property whose rent covers its costs favors DSCR.
