DSCR vs. Conventional: Which Should Investors Actually Use?
A side-by-side of qualifying, pricing, and vesting — plus the two scenarios where DSCR is almost always the wrong call.
Conventional investor loans (Fannie/Freddie) still price better on rate — usually 0.5%–1.0% below DSCR — and they count toward the 10-financed-property cap. DSCR loans qualify on the property's cash flow, allow LLC vesting, and don't touch your personal DTI.
Use conventional when: you have W-2 income, few write-offs, and you're under 4 financed properties. Use DSCR when: you're self-employed with heavy write-offs, you need LLC vesting for liability reasons, or you're stacking beyond conventional's limits.
Where DSCR is almost always wrong: primary residences (not allowed) and short-term flips under 6 months (bridge or hard money is cheaper).
About the author — I'm Everald L. Johnson, a Colorado mortgage broker with Johnson Home Loans and Financial Services, LLC (NMLS #2443040), powered by Zero Point Mortgage Services. I work with buyers, homeowners and investors across Denver, Aurora, Colorado Springs, Parker, Lone Tree, Castle Rock, Highlands Ranch, Centennial, Littleton and the wider Front Range. Call or text (774) 297-8312 and we'll run your actual numbers together.
Frequently asked questions
- What is a DSCR loan?
- A DSCR loan qualifies a Colorado investment property on its rental income coverage rather than your personal income documents.
- When is conventional better than DSCR?
- When you document income easily and want the lowest rate on a property that fits agency limits. DSCR usually prices higher but is far more flexible.
- Can I use DSCR in Denver or Colorado Springs?
- Yes. We place DSCR loans across Colorado for long-term and short-term rentals, subject to lender guidelines.
This article is for informational purposes and is not an offer to lend or a commitment to make a loan. All loans subject to underwriting approval, program guidelines, and appraisal. Equal Housing Opportunity.