In short
Key takeaways
- Fannie Mae caps you at 10 financed properties (Selling Guide B2-2-03). DSCR programs have no agency limit, which is why portfolio investors migrate there.
- Down payment ranges overlap: roughly 15% to 25% conventional for investment property vs 20% to 25% DSCR as of mid-2026. Conventional can start lower on a single-family; 2-4 units close the gap.
- Conventional runs your debts through a DTI cap, commonly around 45%. DSCR performs no DTI calculation at all; the property’s rent-to-payment ratio replaces it.
- Conventional loans carry no prepayment penalty. DSCR loans usually do, and a 2% penalty on a $300,000 balance is $6,000 at your next refinance.
Written and reviewed by the Intel Loans, Inc. lending team · NMLS #2858705Updated July 2026
Side by side
DSCR vs conventional, criterion by criterion
Conventional figures follow the agency rulebook, so they are uniform across lenders. DSCR figures are the typical ranges we see across our wholesale lending partners as of mid-2026; the full program detail lives on our DSCR loan page.
| Criterion | Conventional (Fannie/Freddie) | DSCR (non-QM) |
|---|---|---|
| Qualification basis | You. Personal income, tax returns, and a debt-to-income calculation | The property. Monthly rent divided by PITIA; your income is never calculated |
| Documentation | Two years of tax returns, W-2s or business returns, paystubs, employment verification | Lease or appraiser's rent schedule, credit, and assets. No income documents |
| Down payment | 15% to 25% for investment property as of mid-2026; 2-4 units sit at the top of that range | 20% to 25% typically; thin ratios, condotels, and cash-out push it higher |
| Credit floor | 620 guideline minimum; investor pricing wants far more | 660 to 680 floors are common; 700+ widens the lender pool |
| Loan size | Capped at the conforming limit: $832,750 baseline for a single-family home in 2026 | Program caps are lender-set and often run to $2 to 3 million or more |
| DTI cap | Yes. Commonly capped around 45%, 50% at the outside with strong compensating factors | None. There is no DTI calculation to cap |
| Vesting | Individual or eligible trust at closing. Fannie Mae does not close loans to LLCs | Individual or entity. Closing in an LLC is normal, with a personal guaranty |
| Financed-property limit | 10 financed properties maximum under Fannie Mae Selling Guide B2-2-03, with tighter reserve rules from the seventh | No agency limit; each desk sets its own portfolio exposure rules |
| Prepayment penalty | None. Agency loans have not carried prepay penalties in years | Usually present. Stepdown structures like 3-2-1 are standard and negotiable |
| Pricing | Conventional generally prices better when you can qualify | Carries a premium: the cost of underwriting the property instead of you |
| Reserves | Typically 2 to 6 months of payments, scaling with how many properties you own | 3 to 6 months of PITIA; more for portfolios, cash-out, or ratios below 1.0 |
| Who ends up holding the loan | Sold to Fannie Mae or Freddie Mac, which is why the rulebook is uniform | Sold to non-QM investors and securitizations, which is why every desk's matrix differs |
The key distinction is what gets underwritten. A conventional loan underwrites your life: every write-off, every K-1, every debt on your report flows into one DTI number. A DSCR loan underwrites one question: does this property’s rent cover this property’s payment? Everything else in the table above is downstream of that single difference.
The decision
Choose conventional if...
- Your tax returns show your real income. W-2 earners and self-employed borrowers with clean, lightly-deducted returns clear the DTI math, and conventional generally prices better for the same property.
- You hold fewer than ten financed properties and this purchase keeps you under the B2-2-03 line with room to spare.
- You may sell or refinance inside three years. No prepayment penalty means your exit is free, which matters on a stabilize-and-flip or a rate-watch strategy.
Choose DSCR if...
- Your returns undersell your income. Heavy Schedule E write-offs, paper K-1 losses, or a big depreciation year can make a profitable investor fail DTI math that the property itself passes easily.
- You are at or past the ten-financed-property limit, or you want to preserve your remaining conventional slots and personal DTI capacity for future deals.
- You want the property vested in an LLC at closing for liability separation or partnership accounting. Conventional cannot do this; DSCR does it routinely.
Worked example
The same Tampa duplex, run both ways.
Take the duplex from our DSCR page: $410,000 purchase, 25% down ($102,500), loan amount $307,500, and an appraiser’s rent schedule supporting $1,900 per unit, so $3,800 of monthly rent. PITIA on the quote under review is $3,040. This is a hypothetical illustration for education, not a quote or an offer.
The buyer is self-employed, genuinely profitable, and aggressive with deductions. After write-offs, the qualifying income a conventional underwriter can use is about $5,900 a month. Fannie’s rental math credits a portion of the appraiser’s market rent, typically 75%, so $2,850 against the $3,040 payment leaves a $190 monthly shortfall that lands on the debt side.
If this were a primary residence rather than a rental, the same buyer’s answer would be a bank statement loan, which documents self-employed income from deposits instead of tax returns.
Conventional fails, DSCR clears
Same buyer, same duplex, same money in the deal. Conventional underwriting reads the tax returns and says no at 57% DTI against a cap around 45%. DSCR underwriting reads the property and says yes at 1.25, a ratio that sits in the stronger pricing tiers.
The honest part
What choosing DSCR actually costs you
You pay a premium over agency pricing. Conventional generally prices better; the DSCR premium is the cost of underwriting the property instead of you. If your returns can support conventional qualifying, run that path first. We will tell you plainly if they do.
The prepayment penalty is real money. Conventional investor loans have no prepay penalty. Most DSCR loans do, commonly a 3-2-1 stepdown, and refinancing in year two of that structure costs 2% of the balance. If your plan is to refinance into conventional once a cleaner tax year lands, price the penalty into the plan with the refinance break-even calculator before you sign.
Thin ratios get squeezed. A conventional approval does not move after closing. A DSCR deal underwritten at 1.02 has no cushion for the Florida insurance renewal or the post-purchase tax reassessment that raises PITIA ten months in. If your ratio barely clears, the honest comparison is not DSCR vs conventional; it is whether this deal should be financed at all yet.
How we fit in
We run both paths and show you the numbers
A conventional-only lender will push you to conventional. A non-QM shop will push you to DSCR. As a brokerage we hold neither product; we shop your file to the wholesale desks on both sides, run the DTI math and the ratio math on the same deal, and put the competing terms side by side in writing. Often the answer is conventional. Sometimes the DSCR premium buys something worth paying for: the LLC, the preserved DTI capacity, the eleventh property. Either way you decide from numbers, not from whichever loan the person across the table happens to sell.
Questions we actually get
Can I refinance from a DSCR loan into a conventional loan later?
Yes, and it is a common play: buy with DSCR while your tax returns are weak, then refinance to conventional once a stronger filing year or a paid-off debt fixes the DTI math. Two checks first. One, the DSCR loan’s prepayment penalty: refinancing in year two of a 3-2-1 structure costs 2% of the balance. Two, whether the conventional file actually clears, including the ten-property count and reserve rules. Our refinance break-even calculator shows whether the savings clear the penalty and closing costs.
Does a DSCR loan show up on my personal credit report?
Often it does not, because many DSCR lenders do not report business-purpose loans to the consumer bureaus. Do not build a strategy on that: any future lender will find the debt on your application, on title, and in your bank statements, and omitting it is misrepresentation. The honest benefit is different: a DSCR loan does not consume personal DTI capacity the way a conventional investor loan does, which keeps room open for your next conventional approval.
Can a first-time investor use a DSCR loan, or is conventional the only path?
First-timers can frequently use DSCR. Some programs want prior real-estate ownership or at least a current housing history, and first-time investors may see slightly tighter LTV, but owning your own home for the past twelve months satisfies most desks. Conventional is also open to first-time investors, and if your W-2 income is strong and clean, it is usually the better-priced first move.
What if I qualify for both? Which should I take?
Run conventional first. When both paths clear, conventional generally wins on price, carries no prepayment penalty, and leaves the non-QM option in reserve for later deals. The exceptions that flip the answer: you want the property vested in an LLC from day one, you are protecting personal DTI capacity for another purchase, or you are near the ten-financed-property line and want to save conventional slots for your smaller loans. That is a portfolio-design question, and it is exactly what we price out both ways before you commit.
Do conventional loans allow LLC vesting?
No. Fannie Mae requires the borrower to close as an individual or an eligible inter vivos trust; an LLC cannot be the borrower on a conforming loan. Some investors transfer title to their LLC after closing, which current servicing rules permit in defined cases, but the loan and the personal liability stay in your name. If LLC vesting at the closing table matters to you, that alone points to DSCR.
One property. Two ways to finance it.
Send us the address, the rent, and your income picture. We come back with both paths priced against your actual file, in writing.
This is not a commitment to lend or an offer of credit. All loan approvals are subject to credit review, underwriting, and property evaluation. Programs, terms, and conditions are subject to change without notice.
Intel Loans, Inc., NMLS #2858705. Licensed in Florida. Verify our licensing at nmlsconsumeraccess.org. Equal Housing Opportunity.
DSCR loans discussed on this page are business-purpose loans secured by investment property. They are not for homes you or your family will occupy.
Worked examples on this page are hypothetical illustrations for education, not quotes or offers. Your figures, including taxes, insurance, and payment amounts, will differ.