How each one qualifies you
A conventional investment mortgage looks at your income. The lender wants tax returns, W-2s or business filings, and a debt-to-income ratio that includes every loan you carry. Each new rental adds to the debt side, and eventually the math stops working even if every property is profitable.
A DSCR loan looks at the property. The question is whether the rent covers the payment. Your personal income and number of other properties matter far less.
Where conventional wins
Conventional loans are often cheaper. Rates are usually lower and fees can be smaller. They also rarely carry a prepayment penalty. If you have a strong, simple W-2 income and only a few properties, a conventional loan may cost you less.
Where DSCR wins
DSCR loans shine when conventional lending gets in the way.
- Self-employed borrowers with heavy write-offs
- Investors who hit the cap on conventional financed properties
- Buyers who want to close in an LLC
- Deals that need to close faster than a full income review allows
- Small multifamily and short-term rental properties
The honest cost comparison
Expect a DSCR loan to carry a higher rate than a conventional mortgage on the same property. You are paying for a simpler file and fewer limits. Many investors accept the difference because the loan lets them buy a property they could not otherwise finance, and the cash flow still works.
Run both. Use the calculator on this site to see how the ratio changes at each rate. If the deal clears 1.20 even at the higher DSCR rate, the extra cost is likely a fair trade.
This article is general information and not financial, tax, or legal advice. Loan terms vary by lender and change over time.