By Larissa Bauer
When you’re thinking about financing an investment property, it’s easy to assume a traditional (aka conventional) mortgage is the way to go. But depending on your goals — and your personal financial situation — a DSCR loan might actually be the better move.
So, what’s the difference? Let’s break it down:
A conventional loan mainly cares about your Debt-to-Income (DTI) ratio — basically how much you personally make versus how much you owe. But with a Debt-Service Coverage Ratio (DSCR) loan, the focus flips. Lenders are looking at how much income the property itself can generate compared to the loan payments.
Bottom line: If the property cash flows, you have a shot at approval — even if your personal income isn’t where you want it to be.
Let’s be real: Not everyone has perfect credit, and that’s okay. Conventional loans typically need strong credit scores to qualify, especially if you want the best rates. But DSCR loans? They’re a little more flexible.
Translation: If your credit isn’t quite good enough for a traditional mortgage, a DSCR loan can still get you in the game.
Here’s something a lot of new investors don’t realize: Fannie Mae and Freddie Mac put a cap on how many conventional mortgages you can have at once. That cap? 10 loans total. Once you hit that number, you can’t just stack up more traditional mortgages.
If you’re serious about scaling your portfolio, you’ll need other options — like DSCR loans, portfolio loans, or private financing.
Pro tip: DSCR loans are a great tool to keep growing your rental portfolio once you’ve maxed out your conventional slots.
Another major bonus: Conventional loans are reported directly to your credit. That can weigh down your personal credit profile and impact future financing options.
DSCR loans? Typically not reported to your credit bureau — keeping your personal credit cleaner and more flexible.
Last but not least — the rules for DSCR loans are just different.
This gives investors a lot more flexibility to tailor financing to the deal rather than being boxed in by traditional lending guidelines.
If you’ve got solid cash flow properties but don’t want personal income or conventional limits to slow you down, a DSCR loan might be exactly what you need.
Let’s talk. You can reach me at lbauer@flipsideloans.com to learn more.
