DSCR and conventional loans side by side
You are comparing two loans for the same rental and want the real differences, not a sales pitch. The table lays out how each one treats the points that decide most deals.
| Point | Conventional | DSCR |
|---|---|---|
| What qualifies you | Your income and debts (DTI) | The rent compared with the payment (DSCR) |
| Property use | Primary home, second home or investment | Investment property only |
| Income documents | Tax returns, W-2s, pay stubs, 2 years of history | Usually none. A lease or the appraiser's rent schedule. |
| Credit score | 620 minimum. Pricing improves at each step up. | 620 to 700 minimum. Better pricing above 700. |
| Rate | The lower of the two | Commonly 0.5 to 1.5 percentage points higher |
| Down payment | 15% to 25% on an investment property | 20% to 30% on a purchase |
| Buying in an LLC | Not eligible. Title goes in your own name. | Yes at most lenders, with a personal guarantee |
| Financed properties | Capped at 10 per borrower | No set cap at many lenders |
| Speed | Several weeks. Income review adds time. | Several weeks. No income review, but the appraisal and title still set the pace. |
Market ranges as of October 2026, drawn from published lender guidelines and industry guides. Advanced Funding Solutions is a broker and does not set these numbers. The lender that funds your loan sets your actual terms, and no lender can promise a closing date.
The one difference behind all the others
Most of the table comes back to a single question: who does the lender trust to pay the bill, you or the house? A conventional lender trusts your paycheck, so it reads your returns and counts every other debt you carry.
A DSCR lender, short for debt service coverage ratio, trusts the rent. It divides the monthly rent by the monthly payment and wants the answer at 1.0 or better. Our DSCR loan requirements guide covers that math and the full checklist.
That is why the two loans suit different people. A salaried buyer with one rental has no reason to give up a lower rate. An investor with twelve properties, or a self employed owner whose returns show little income after write offs, may not fit conventional rules at all.
What the rate gap costs you
You pay for the flexibility of a DSCR loan every month, so put a number on it before you choose. A gap of 0.5 to 1.5 percentage points on a $600,000 loan adds roughly $250 to $750 a month in extra interest.
You can run your own figures in our DSCR calculator, and the 2026 guide to DSCR rates in California explains what moves the price. Many DSCR loans also carry a prepayment penalty for the first few years, which a conventional investment loan usually does not.
The gap narrows when the deal is strong. A credit score above 700, a lower LTV and a ratio of 1.25 or better all pull the DSCR rate closer to conventional.
Choose a DSCR loan if
- Your tax returns show less income than you really earn, because of write offs or a business structure.
- You are self employed, or you earn mostly from other rentals, and the paperwork would be a long fight.
- You want the loan in an LLC for liability reasons. Our guide to DSCR loans for an LLC explains how that works.
- You already hold 10 financed properties, or you are close, and conventional loans have run out.
- You are buying several rentals in a row and do not want each purchase to add to your debt to income ratio.
Choose a conventional loan if
You may be paying for a loan you do not need, and the honest answer is often to skip DSCR. If your returns show steady income, your debt to income ratio is comfortable and you hold fewer than 10 financed properties, the conventional loan almost always costs less. Take it.
- You are a W-2 employee with two years of stable income and a good score.
- You can put the property in your own name and still get the liability cover you want, perhaps through an umbrella policy.
- You plan to sell or refinance within a couple of years, so a prepayment penalty would hurt.
- You want to live in part of the building. A duplex where you take one unit does not qualify for DSCR, but it can qualify for conventional, FHA or VA financing.
If you are not sure which side you fall on, our page on conventional loans shows how those are arranged.
Moving from one loan to the other
You are not locked into your first choice. Plenty of investors buy with a DSCR loan because the deal is moving fast or the income is hard to document, then refinance into a conventional loan once their returns catch up.
The refinance only works if you qualify the conventional way at that point, and a prepayment penalty can eat the savings. Ask about both before you sign the first loan.
Call us before you decide
You do not have to guess which loan fits. Advanced Funding Solutions is a California mortgage brokerage that works with 100+ wholesale lenders, and we can check your numbers against both kinds. The lender you choose approves and funds the loan.
The first call is a few questions about the property, the rent and your income. Call (818) 478-2555, or request a quote online.
For the full picture on investor financing here, see our main page on DSCR loans in California.
Frequently Asked Questions
Is a DSCR loan a conventional loan?
No. A conventional loan follows the guidelines Fannie Mae and Freddie Mac publish, and it qualifies you on personal income. A DSCR loan is a non QM, business purpose loan that qualifies the rental on its own rent. Both can finance the same house.
Are DSCR loan rates higher than conventional rates?
Usually, yes. As of October 2026, DSCR rates commonly run about 0.5 to 1.5 percentage points above a conventional investment loan. The gap shrinks with a higher credit score, a lower LTV and a rent that comfortably covers the payment.
Is a DSCR loan harder to get than a conventional loan?
Not harder, just different. A DSCR lender skips your tax returns and checks the rent, your credit and your cash. A conventional lender checks all of your income and debts. Investors with messy returns often find DSCR easier.
Can I refinance a DSCR loan into a conventional loan later?
Yes, if you qualify at that point. You would need income that meets conventional rules and a property that fits them. Many DSCR loans also carry a prepayment penalty, so ask about it before you sign.
Which loan works better if I own more than 10 rentals?
DSCR, in most cases. Conventional guidelines cap how many financed properties one borrower can hold, while DSCR lenders look mainly at the rent on the property you are buying.
Advanced Funding Solutions Inc. is a licensed mortgage brokerage, not a lender. NMLS #1277693. CA DRE #01973518. Consumer mortgage loans are licensed in California and Florida; DSCR loans are business purpose loans. All loans are subject to credit, income, asset, property, and underwriting approval. The funding lender sets rates, terms and conditions, which can change without notice. Market ranges on this page are typical industry figures as of October 2026, not an offer or a commitment to lend. Equal Housing Opportunity.