The Financial Suit Team

"Should I use a DSCR loan or go conventional for my next rental?"

This is one of the most common questions I get from investors. And the answer depends on your situation.

Both work for investment properties. But they qualify you in completely different ways. Here's the honest comparison.

Conventional (Fannie/Freddie):

You qualify based on your personal income. Tax returns, W-2s, pay stubs. The lender calculates your debt-to-income ratio using all your obligations including existing mortgages.

Pros:
- Lower rates (typically the best pricing available)
- As little as 15% down on investment properties
- Familiar process if you've bought a primary residence

Limitations:
- Maximum 10 financed properties. After that, you're done.
- Must close in your personal name. No LLC vesting.
- Your tax returns must show enough income to support the new payment on top of everything else you owe.
- If your accountant is doing their job minimizing your taxable income, this becomes the problem.

DSCR (Debt Service Coverage Ratio):

The property qualifies itself. The lender looks at one number: does the rental income cover the mortgage payment? Your personal income isn't part of the equation.

Pros:
- No tax returns, no W-2s, no income verification
- Close in an LLC from day one
- No limit on how many properties you finance
- Faster underwriting (I've closed in 14 days)
- Available in 48 states (all except NY and MA)

Limitations:
- Investment properties only (no primary residence, no second home)
- Typically 20-25% down payment required
- The property must generate enough rent to cover or come close to covering the payment

So when does each make sense?

Use conventional if:
- You have fewer than 10 financed properties
- Your tax returns show strong income
- You want the lowest possible rate
- You're comfortable closing in your personal name

Use DSCR if:
- You're past 10 financed properties (or getting close)
- Your tax returns don't reflect your real earning power
- You want to hold properties in an LLC
- You're scaling a portfolio and need a repeatable process
- Speed matters

A lot of my clients start with conventional on their first few rentals, then switch to DSCR as they scale. The programs aren't competing. They're different tools for different stages.

Building your rental portfolio? Let's figure out which program fits where you are right now.