By 2024, DSCR lending has become the dominant investor financing product in America. But DSCR isn't the only way to finance rental properties, and it's not always the cheapest.
The alternative is portfolio lending — local banks or credit unions that hold loans in-house and use hybrid underwriting (your income + property DSCR).
DSCR: Property-Only Underwriting
How it works: Lender looks at the rent divided by the payment. Does it cover? Approve. Your personal income, your credit, your job stability — mostly irrelevant.
| DSCR Metric | Typical Terms |
|---|---|
| Down payment | 20–25% |
| LTV max | 75–80% |
| Reserves | 3–6 months |
| Credit score | 620+ |
| Rate | Prime + 0.5–1.0% |
The edge: Self-employed. No income documentation. Approval is mechanical: run the rent number, plug it in, get a yes or no.
The trap: You pay for the simplicity. DSCR rates are about 0.5–1% higher than conventional portfolio products. On a $250k loan at 6.5% vs. 7%, that's $130/month extra — $1,560/year, $15,600 over 10 years.
Portfolio Lending: Hybrid Underwriting
How it works: Local bank or credit union takes your loan in-house. They look at your income + the property DSCR. You don't have to be a W-2 employee, but they want to see some qualification beyond just the property numbers.
| Portfolio Metric | Typical Terms |
|---|---|
| Down payment | 15–20% |
| LTV max | 75–85% |
| Reserves | Often waived, 2–3 months typical |
| Credit score | 650+ |
| Rate | Prime to Prime – 0.25% |
The edge: Better rates, often lower down payment, faster close (some portfolio lenders close in 21 days). More flexibility on occupancy (some allow rentals of primary residences, which DSCR technically does too but DSCR lenders are pickier).
The trap: Requires relationship banking. You can't apply online. Not accessible to everyone. Many portfolio lenders have $2M+ portfolio minimums or require you to keep business banking with them.
Real Example: $250,000 Triplex, 20% Down
Both loans approved:
| Factor | DSCR | Portfolio |
|---|---|---|
| Loan amount | $200,000 | $200,000 |
| Interest rate | 7.0% | 6.5% |
| 30-year P&I | $1,331 | $1,262 |
| Annual interest cost | $15,972 | $15,068 |
| 10-year interest saving | — | $9,000 |
| Closing cost | $3,000 | $2,500 |
| Appraisal | $800 | $600 |
| Close time | 35 days | 21 days |
Portfolio lender saves you ~$9k+ over the life of the loan, closes 14 days faster, and charges less for ancillary fees.
When DSCR Actually Wins
- Very low DSCR (0.9–1.1): Portfolio lenders get nervous; DSCR lenders can work down to 0.95 DSCR on some programs.
- No personal credit: If your credit score is 600–620, DSCR (which is flexible on credit) might be your only option.
- Rapid-fire acquisitions: DSCR lenders are faster at processing volume. Closing your 4th property in 18 months? DSCR is standardized.
- Out-of-state investor: You're buying in a state you don't live in, no local banking relationships. DSCR is national and accessible.
When Portfolio Lending Wins
- Strong personal credit + income: If you qualify on both metrics, portfolio pricing destroys DSCR.
- Long-term hold: You're buying 1–2 properties to keep forever. Build the relationship, get better rates.
- Lower down payment: Portfolio lenders often do 15% down; DSCR is typically 20%+.
- Complex deals: Purchasing with an LLC, multi-state ownership, commercial + residential hybrid. Portfolio lenders can be more flexible.
The Strategic Play
Get pre-approved for both DSCR and a portfolio lender before you start shopping. Compare terms. More often than not, the portfolio lender is cheaper — but they might require 14–21 days to underwrite (slower than DSCR's standardized process).
If you find a deal mid-market and need to close in 30 days, DSCR might be your only option. If you're building a long-term portfolio and have time, portfolio lenders earn their lower rates.