Conventional Financing
May evaluate:
- W-2 income
- Self-employed income
- Tax returns
- DTI
- Credit
- Assets
- Reserves
- Rental income
DSCR Financing
May emphasize:
- Property rent
- Property payment
- DSCR
- Credit
- Reserves
- LTV
- Property eligibility
typically without traditional personal-income qualification.
Why Would an Investor Pay More for DSCR?
Because qualification flexibility has value.
Illustration only
Imagine an investor owns six rentals and a business. Tax returns are complicated. Traditional underwriting becomes increasingly difficult.
A DSCR lender may focus on whether Rental #7 supports its own debt.
Why Would Someone Choose Conventional Instead?
Potentially:
- Better pricing
- Lower fees
- No investor-style prepayment penalty
- Familiar long-term financing
if the borrower qualifies.
Prepayment Penalties Matter
Some business-purpose DSCR loans can include prepayment penalties.
An investor planning to sell or refinance quickly should understand:
- Penalty period
- Calculation
- Step-down structure
- Exceptions
before signing.
Don't Compare Only Interest Rates
Compare:
- Rate
- Points
- Down payment
- Prepayment penalty
- Reserves
- Closing costs
- Monthly payment
- Cash flow
- Planned holding period
