- Fannie Mae's minimum down payment on an investment property is 15% for one unit and 25% for two to four units (Eligibility Matrix, August 5, 2026).
- Fannie Mae caps you at 10 financed properties (Selling Guide B2-2-03), and reserve requirements climb as you add doors.
- Conventional underwriting counts 75% of the rent and adds any shortfall to your debts. A DSCR lender divides the qualifying rent by the payment.
- On a $225,000 loan, a 0.75-point rate gap costs about $115 a month, or $6,900 over five years.
- Conventional pricing already includes Fannie Mae investment-property adjustments of 1.125% to 4.125% of the loan, depending on LTV, so the real gap is often smaller than headline rates suggest.
Conventional usually costs less. DSCR qualifies more deals.
The DSCR loan vs conventional decision comes down to one trade. A conventional investment mortgage, the kind sold to Fannie Mae or Freddie Mac, usually carries the lower rate, but it underwrites you: tax returns, debt-to-income ratio, reserves and a count of every financed property you own. A DSCR loan usually costs more, but it underwrites the property: does the rent cover the payment? If your documented income qualifies easily and you have fewer than 10 financed properties, conventional usually wins on cost. If it doesn't, the extra rate on a DSCR loan is the price of not proving income.
Both loans in this guide are for investment property that neither you nor your family will live in. A home you'll live in needs a residential mortgage, with its own rules and pricing. Fannie Mae figures below come from its Selling Guide and the Eligibility Matrix dated August 5, 2026. DSCR figures are ranges lenders published in September and October 2026.
Side by side: what each lender actually checks
| Feature | DSCR loan | Conventional (Fannie Mae) |
|---|---|---|
| Qualifies on | Property rent vs. PITIA | Your income and debt-to-income ratio |
| Income documents | None: no tax returns, W-2s or pay stubs | Tax returns, W-2s or pay stubs |
| Rent counted | Lower of lease and market rent; Kiavi allows up to 110% of market rent with a lease | 75% of gross rent; a shortfall vs. PITIA is added to your debts |
| Minimum down, purchase | 20% at most lenders; 15% at a few with 720–740+ credit | 15% for 1 unit; 25% for 2–4 units |
| Max LTV, cash-out | 70–80%; most 75% | 75% for 1 unit; 70% for 2–4 units |
| Financed-property limit | No Fannie-style program cap | 10 financed properties |
| Reserves | None to 9 months of PITIA | 6 months of PITIA, plus 2–6% of balances on other financed properties |
| Borrower | Individual or LLC; Lima One, Roc and Civic require an LLC | Individuals; LLC-held property must be deeded to you to refinance |
| Prepayment penalty | Common; 5-4-3-2-1 is the default | Not allowed on loans Fannie Mae buys |
| Cash-out seasoning | Often 90 days; some lenders offer none | 6 months on title; existing first mortgage at least 12 months old |
| Rate | Typically higher | Typically lower, after investment-property price adjustments |
Swipe the table to see every column →
Fannie Mae's investor rules: 15% down, 10 properties, 75% of the rent
Minimum down payment
Fannie Mae's Eligibility Matrix caps a Desktop Underwriter (DU) purchase of an investment property at 85% loan-to-value for one unit and 75% for two to four units. That makes the minimum down payment 15% on a single-family rental and 25% on a duplex through fourplex. Rate-and-term refinances top out at 75%; cash-out refinances at 75% for one unit and 70% for two to four.
15% down is allowed, but it is rarely the cheap option. Anything above 80% LTV needs mortgage insurance (Selling Guide B7-1-01), and Fannie's loan-level price adjustment for an investment property rises from 3.375% of the loan at 75.01–80% LTV to 4.125% above 80%. Most DSCR lenders want 20% down; a few go to 15% for 720–740+ credit.
The 10-property limit
Selling Guide section B2-2-03 caps a borrower financing an investment property or second home at 10 financed properties, and only through DU. The count includes every one- to four-unit property where you are personally obligated on the mortgage, your own home if it's financed, and the property you're buying. A fourplex counts as one. Fannie's own example leaves out rentals financed in an LLC where the borrower isn't personally obligated on the mortgage. Whether a personal guarantee on a DSCR loan changes that is a question for the conventional lender.
Reserves grow with the portfolio
DU requires six months of PITIA in reserves for an investment property (B3-4.1-01), plus a percentage of the mortgage balances on your other financed properties: 2% with one to four financed properties, 4% with five or six, and 6% with seven to ten. Your home and the subject property are left out of that balance. Say you're buying your sixth financed property, the new loan's PITIA is $1,927, and your other rentals carry $800,000 of mortgages. You need $11,562 plus $32,000, or $43,562, in verified reserves. DSCR lenders published requirements from none to nine months of PITIA on the new loan.
How the rent counts
On a conventional purchase, the lender multiplies the gross rent from the lease or the appraiser's Form 1007 by 75%, then subtracts the property's PITIA (B3-3.8-02). A positive result counts as income only if you have at least 12 months of property-management experience; otherwise it can only offset the payment. A negative result is added to your debts. A DSCR lender takes the qualifying rent, usually the lower of the lease and market rent, and divides it by PITIA. Your personal income never enters the ratio.
Worked example: the same $300,000 rental, two loans
Take a $300,000 single-family rental bought with 25% down, so both loans are $225,000 over 30 years. Market rent is $2,300 a month, property taxes $300 and insurance $130. The rates are illustrative, a 0.75-point spread chosen to show the math, not a quote from any lender.
| Feature | Conventional | DSCR loan |
|---|---|---|
| Loan amount | $225,000 | $225,000 |
| Rate (illustrative) | 7.00% | 7.75% |
| Monthly principal & interest | $1,497 | $1,612 |
| Taxes + insurance | $430 | $430 |
| PITIA | $1,927 | $2,042 |
| Interest paid, first 5 years | $76,612 | $85,123 |
| Balance after 5 years | $211,796 | $213,407 |
| How the rent qualifies | $2,300 × 75% − $1,927 = −$202 a month, added to your debts | $2,300 ÷ $2,042 = DSCR 1.13 |
Swipe the table to see every column →
The DSCR loan costs $115 more a month: $1,380 a year and $6,900 over five years. Over those five years the DSCR borrower pays $8,511 more in interest and pays down $1,611 less principal. If you hold the loan for all 30 years, the gap is about $41,400, though few investors keep one loan that long.
Now look at the bottom row. The same property that clears a DSCR lender at 1.13 shows up in conventional underwriting as a $202 monthly loss, because only 75% of the rent counts. If your debt-to-income ratio is already near the limit, that $202 can sink the conventional file, and the cheaper rate stops mattering.
When conventional wins
- Your income is strong and documented. W-2 income, or tax returns that show real profit after write-offs, with room in your debt-to-income ratio for the new payment and any rental shortfall.
- You'll have 10 or fewer financed properties after closing, and you can document the reserve add-on for the ones you already own.
- You want the lowest cost and a free exit. Fannie Mae doesn't buy loans with prepayment penalties (A3-2-02), so selling or refinancing in year two costs nothing extra.
- You're buying one unit with 15% down and accept mortgage insurance and higher pricing to keep cash free for the next deal.
- You're comfortable holding title in your own name rather than an LLC.
The classic conventional borrower is a salaried investor buying a second or third rental. The rate is lower, there's no penalty, and the paperwork is a one-time cost.
When a DSCR loan wins
- Your tax returns undersell you. Depreciation and deductions shrink taxable income, and self-employed investors often can't qualify conventionally at all.
- You're at or near 10 financed properties, or the 4–6% reserve add-on ties up cash you'd rather put into the next purchase.
- You want to close in an LLC. Every DSCR lender in our October 2026 research allows it, and Lima One, Roc and Civic require it.
- You're new to landlording. Most DSCR lenders don't require experience, while Fannie lets the rent only offset the payment until you have 12 months of management history.
- It's a short-term rental. Fannie's new rule (B3-3.8-03, September 2, 2026) counts STR income on one-unit investment properties at 50% and only to offset the payment. STR-focused DSCR programs size the loan on projected or trailing bookings.
- You want cash out sooner. Fannie requires six months on title and a 12-month-old first mortgage. DSCR lenders commonly published 90 days, and some advertise no-seasoning options.
No income documents still means underwriting
Skipping tax returns doesn't mean skipping review. DSCR lenders published minimum credit scores of 620–680 in October 2026, most at 640–660, with the best leverage and pricing reserved for 700–740+. Most want a DSCR of at least 1.00; some accept 0.75–0.80 in exchange for a bigger down payment. The appraiser's rent schedule sets market rent, and Roc and Civic count a vacant property at 90% of it. You'll show bank statements for the down payment and reserves, plus entity documents if you close in an LLC, usually with a personal guarantee. Closing typically takes two to five weeks, most of it spent waiting on the appraisal.
The practical difference is where the risk sits. A conventional file can fail on your paperwork even when the property cash-flows. A DSCR file can fail on the property even when your income is strong: thin rent, high taxes or an expensive insurance quote can push the ratio under 1.00.
A quick way to decide
- Run the conventional math first: 75% of the rent minus PITIA, with any shortfall added to your debt-to-income ratio. If you clear the lender's limit with room to spare, get a conventional quote.
- Count your financed properties the way B2-2-03 does. If this purchase makes nine or ten, decide now how you'll finance the deals after it.
- Price your exit. If you might sell or refinance within three to five years, compare the conventional loan with a DSCR loan that has a short penalty or none. That choice moves the DSCR rate.
- Get both quotes at the same LTV and compare payment plus points over your expected hold, not the headline rate.
Plenty of investors use both: conventional for the first few doors while a W-2 carries the debt-to-income ratio, then DSCR once the portfolio, the LLC structure or self-employment income no longer fits Fannie Mae's box. Refinancing a conventional rental into a DSCR loan later is straightforward, because there's no prepayment penalty to pay on the way out.