DSCR vs. Conventional Investment Property Loans: How Each One Qualifies You
If you're financing a rental, the biggest question is how you'll qualify. I'm Phil Hagey, a loan officer with West Capital Lending, which offers both conventional loans and DSCR loans. Through West Capital Lending's network of more than 160 lenders, I'll show you which path may fit and give you an estimate for each.
Side by side
| DSCR loan | Conventional investment loan | |
|---|---|---|
| How you qualify | Mainly the property's rent compared to its housing costs | Mainly your documented personal income and debts |
| Income documents | Personal tax returns usually not needed for income | Tax returns, W-2s or other income documents typically required |
| Down payment and cost | Usually a larger down payment, and costs may be higher | Often a lower down payment and lower cost for clients who qualify |
| Vesting | Some lenders allow closing in an LLC, depending on guidelines | Typically closes in your personal name |
| Number of properties | Often suited to growing portfolios, depending on the lender | Limits on the number of financed properties may apply |
| Occupancy | Investment property only, business-purpose | Investment property (separate programs exist for homes you live in) |
| Main trade-off | Easier income documentation, but usually higher cost | Lower cost, but your personal income must qualify |
Features vary by lender and program. Phil gives you an estimate for each option so you can compare actual costs.
A DSCR loan may fit you if…
- Your tax returns don't reflect your full income, for example if you're self-employed
- The property's rent comfortably covers its costs
- You want to grow a portfolio or close in an entity, depending on the lender
- You prefer qualifying on the property rather than your personal income
A conventional investment loan may fit you if…
- Your documented income qualifies easily
- You want to keep your down payment and costs as low as possible
- You own only a few financed properties
- You're comfortable providing full income documentation
Not sure? That's normal. I'll compare both with you and tell you plainly if neither is a good fit for you.
Learn more
Frequently asked questions
What's the main difference between a DSCR loan and a conventional investment loan?
A DSCR loan qualifies mainly on the property's rental income, while a conventional investment loan qualifies mainly on your documented personal income. Phil Hagey can show you how each would treat your deal.
Is a DSCR loan more expensive?
Usually. DSCR loans typically require a larger down payment and may cost more than conventional financing. Phil Hagey compares both in an estimate so you can see the trade-off.
Can I use either loan for a home I'll live in?
DSCR loans are business-purpose loans for investment property only. A conventional investment loan is also for investment property, though separate conventional programs exist for homes you live in. Phil Hagey can point you to the right option.
How does Phil Hagey help me choose?
Phil Hagey reviews your income documents, the property's rent and expenses, and your goals, then compares programs across more than 160 lenders and walks you through an estimate.
Have a rental property in mind? Send Phil the address and the numbers, or call 949-864-1497, for an estimate.
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DSCR loans are business-purpose loans for investment property and are not available for owner-occupied homes. Loans subject to credit approval and property eligibility.