What's the difference between a DSCR loan and a conventional loan?

Direct answer

Conventional loans qualify on personal income and credit; DSCR loans qualify on the property's cash flow. DSCR allows unlimited properties, no tax returns, but slightly higher rates.

Expanded explanation

Conventional caps at 10 mortgages and requires full income docs — restrictive at scale. DSCR loans use Debt Service Coverage Ratio (NOI ÷ debt service) of typically 1.20+, allow LLC ownership, close in 3–4 weeks, and have no portfolio cap. Rates run 0.5–1.5% higher than conventional, and prepayment penalties usually apply for 3–5 years.

Examples

• Conventional 7.0% / 25% down vs DSCR 8.0% / 25% down on a $250k rental.

More Financing questions

• Conventional vs DSCR loan — which to choose?
• When does hard money make sense?
• When should I use a portfolio lender?
• How do I negotiate seller financing?
• What is DSCR and what's a good ratio?
• Is a rate buydown worth it?