DSCR vs. Conventional Loan for Scottsdale Rentals (2026)

Scottsdale's rental market, especially with short-term rentals (STRs), is a prime target for investors. But how you finance that property matters. The two most common paths are a Conventional investment property loan and a DSCR loan. Let's break down which is better for your next Scottsdale rental.

What is a Conventional Investment Loan?

This is the 'traditional' way. Lenders will verify your personal income, assets, and debts using your tax returns, W-2s, and bank statements. They will look at your Debt-to-Income (DTI) ratio to ensure you can afford the new mortgage payment on top of your existing debts. This is a great option if you have a stable W-2 job and a low DTI.

• Pros: Typically offers the best interest rates.
• Cons: Hard to qualify for if you're self-employed or have multiple other properties. Your personal DTI is the biggest hurdle.

What is a DSCR Loan?

DSCR stands for 'Debt Service Coverage Ratio.' This loan is designed specifically for real estate investors. Instead of using your personal income, the lender qualifies you based on the *property's* potential rental income. The 'ratio' simply compares the property's expected gross rent to its monthly mortgage payment (PITI - Principal, Interest, Taxes, Insurance).

If the rent covers the payment (a 1.0 ratio) or, more commonly, exceeds it (e.g., a 1.25 ratio), you can be approved. We even have programs that allow ratios under 1.0.

• Pros: No personal income verification. No tax returns or W-2s needed. Allows you to scale your rental portfolio much faster.
• Cons: Interest rates are typically 1-2% higher than conventional loans. Requires a larger down payment (usually 20-25%).

Which is Better for a Scottsdale Rental?

Choose Conventional if:

• You are buying your first or second rental property.
• You have a strong W-2 income and a low DTI ratio.
• You want the absolute lowest interest rate possible.

Choose DSCR if:

• You are self-employed or have complex income.
• You already have several mortgaged properties and your DTI is high.
• You want to buy the property in an LLC for liability protection.
• The Scottsdale property has strong rental income (especially as an Airbnb or STR) that can easily cover the mortgage payment.

For most serious investors looking to scale in markets like Scottsdale, the DSCR loan is the clear winner. It treats your investment like a business, focusing on the asset's performance, not your personal paycheck. Ready to see what your rental property can qualify for? Let's run the numbers.