DSCR vs Conventional Investment Property Loans in Arizona
A DSCR loan qualifies an Arizona rental on the property's rent, while a conventional investment property loan qualifies you on your personal income, tax returns and debt to income ratio under Fannie Mae's Selling Guide. Pillar Mortgage Group in Scottsdale helps investors compare both, and the right choice usually comes down to how your income documents, how many properties you already finance, and whether you want to close in an LLC.
Quick facts
- Pillar Mortgage Group places DSCR loans down to a 0.75 ratio with no tax returns or W-2s, and LLC financing is allowed (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
- DSCR terms at Pillar Mortgage Group: credit around 660 or higher, typically 20 to 25% down, reserves of roughly 3 to 6 months, loan amounts up to $5 million (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
- Fannie Mae's maximum LTV on an investment property purchase through DU is 85% for one unit and 75% for two to four units (Fannie Mae Eligibility Matrix, August 5, 2026).
- Fannie Mae limits second home and investment borrowers to 10 financed properties through DU (Selling Guide B2-2-03, dated November 5, 2025).
- On a conventional purchase, Fannie Mae counts 75% of monthly gross rent from Form 1007 or 1025 (Selling Guide B3-3.8-02, dated September 2, 2026).
The short answer
Choose a conventional loan when your tax returns show strong, steady income, your debt to income ratio has room, you own fewer than 10 financed properties, and you are comfortable holding title in your own name. Choose a DSCR loan when your returns understate your income, you are self-employed or write off heavily, you are building past the conventional property count, you want to close in an LLC, or the property is a short-term rental. Many investors use both over time: conventional for the first few doors, DSCR once the portfolio or the paperwork outgrows conventional rules.
DSCR vs conventional: side by side
| Feature | DSCR loan (Pillar Mortgage Group) | Conventional investment loan (Fannie Mae) |
|---|---|---|
| How you qualify | The property's rent divided by its PITIA payment; ratios down to 0.75 | Your personal income and debt to income ratio, with rental income as one input |
| Income documents | No tax returns or W-2s | Income documentation per the Selling Guide; on a refinance, the most recent Form 1040 with Schedules 1 and E |
| Down payment or max LTV on a purchase | Typically 20 to 25% down | Max LTV 85% for one unit and 75% for two to four units (DU, fixed rate) |
| Financed property limit | No conventional style cap; terms vary by lender | 10 financed properties for second home or investment through DU |
| Vesting | LLC allowed | Borrowers must be natural persons, with limited trust exceptions |
| Rental income on a purchase | Market rent or lease drives the ratio | 75% of monthly gross rent from Form 1007 or 1025 |
| Short-term rental income | Accepted by many programs; terms vary | One-unit investment properties only, legally permitted, counted at 50% of gross rent on a purchase |
| Credit | Around 660 or higher | Set by DU findings and pricing adjustments |
| Reserves | Roughly 3 to 6 months of payments | Additional reserves based on the number of financed properties |
| Loan amount | Up to $5 million | Subject to conforming loan limits |
Sources: Pillar Mortgage Group column from our DSCR loans page; Fannie Mae column from the Eligibility Matrix (August 5, 2026), B2-2-03, B3-3.8-02, B3-3.8-03 and B2-2-01, all accessed October 25, 2026.
Conventional investment property LTV limits
Fannie Mae publishes its loan to value limits in the Eligibility Matrix, which is incorporated by reference into the Selling Guide. For investment properties underwritten through Desktop Underwriter with a fixed rate, the limits are (Fannie Mae Eligibility Matrix, August 5, 2026):
| Transaction | 1 unit | 2 to 4 units |
|---|---|---|
| Purchase | 85% | 75% |
| Limited cash-out refinance | 75% | 75% |
| Cash-out refinance | 75% | 70% |
Hitting the maximum LTV is not the same as qualifying for it. Pricing adjustments, mortgage insurance on higher LTV purchases, and reserve rules all affect the real cost, so compare the full payment and cash to close, not just the down payment.
The 10 financed property cap
Fannie Mae's Selling Guide caps second home and investment property borrowers at 10 financed properties through DU, and additional reserve requirements apply as the number of financed properties grows (Selling Guide B2-2-03, dated November 5, 2025). The count includes properties you are personally obligated on, which for many investors includes their own home. Once you reach the cap, a conventional loan is no longer an option for the next purchase, and DSCR financing becomes the usual path.
How each loan treats rental income
On a conventional purchase, Fannie Mae requires Form 1007 or Form 1025 and, when a lease transfers to you, a fully executed lease. The lender multiplies monthly gross rent by 75 percent to get net rental income and then subtracts the property's PITIA. On a refinance, the lender also needs your most recent Form 1040 with Schedules 1 and E. If you have less than 12 months of rental management experience, positive rental income can only offset the property's own payment (Selling Guide B3-3.8-02, dated September 2, 2026). Short-term rental income is narrower still: one-unit investment properties only, legally permitted, counted at 50 percent of gross rent on a purchase (Selling Guide B3-3.8-03, dated September 2, 2026).
A DSCR loan skips your personal income entirely. The lender compares the property's rent to its payment and stops there. We walk through that math with Phoenix numbers in how to calculate DSCR, and short-term rental files are covered in DSCR loans for Airbnb and short-term rentals in Arizona.
Vesting: personal name vs LLC
Fannie Mae purchases loans made to borrowers who are natural persons, with limited exceptions such as certain revocable trusts (Selling Guide B2-2-01, dated September 3, 2025). In practice that means a conventional investment loan closes in your personal name. A DSCR loan through Pillar Mortgage Group can close in the name of an LLC (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026). If you already hold a rental in an LLC and want to refinance it, our guide to refinancing a rental held in an LLC explains the trade-offs.
Which one fits your Arizona deal
| Your situation | Usually points to |
|---|---|
| W-2 income, low debt, first or second rental | Conventional |
| Self-employed with heavy write-offs | DSCR |
| Already at 10 financed properties | DSCR |
| Want title in an LLC at closing | DSCR |
| Short-term rental in Scottsdale, Sedona or Flagstaff | DSCR, in most cases |
| Rent comfortably covers the payment and you want the simplest file | Either; compare total cost |
Local rent and value data change the answer by city. See our market pages for DSCR loans in Phoenix, DSCR loans in Mesa, DSCR loans in Gilbert, DSCR loans in Chandler and DSCR loans in Tempe. If you are investing from another state, read buying Arizona rental property from out of state. To browse properties before you run numbers, try Arizona Luxury Property Search.
Terms on both sides vary by lender, program and borrower. Book a call with Blake Hermann, Director of Lending, and we will price both paths on the same property so you can compare actual payments.
Frequently asked questions
Is a DSCR loan better than a conventional loan for an investment property?
It depends on your file. Conventional loans fit borrowers whose tax returns support the debt to income ratio and who own fewer than 10 financed properties. DSCR loans fit investors who want to qualify on the property's rent, skip tax returns, close in an LLC, or finance short-term rentals.
What is the maximum LTV on a conventional investment property loan?
Fannie Mae's Eligibility Matrix dated August 5, 2026 sets a maximum LTV of 85% for a one-unit investment purchase and 75% for two to four units through DU with a fixed rate. Cash-out refinances are capped at 75% for one unit and 70% for two to four units.
How many investment properties can I finance with a conventional loan?
Fannie Mae Selling Guide B2-2-03 allows up to 10 financed properties for second home or investment transactions through DU, with additional reserve requirements as the count rises.
How does Fannie Mae count rental income on an investment property?
On a purchase, Fannie Mae uses Form 1007 or 1025 and counts 75% of monthly gross rent as net rental income before subtracting PITIA. On a refinance it also requires the most recent Form 1040 with Schedules 1 and E, per Selling Guide B3-3.8-02.
Can I close a DSCR loan in an LLC in Arizona?
Yes. Pillar Mortgage Group allows DSCR financing in the name of an LLC, with ratios down to 0.75, credit around 660 or higher, and typically 20 to 25% down. Conventional loans sold to Fannie Mae must be made to natural persons.
Sources
- Pillar Mortgage Group, DSCR Loans program page, accessed October 25, 2026. https://pillarmortgagegroup.com/dscr-loans
- Fannie Mae Eligibility Matrix, August 5, 2026, incorporated by reference into the Selling Guide. https://singlefamily.fanniemae.com/media/20786/display
- Fannie Mae Selling Guide B2-2-03, Multiple Financed Properties for the Same Borrower, dated November 5, 2025. https://selling-guide.fanniemae.com/sel/b2-2-03/multiple-financed-properties-same-borrower
- Fannie Mae Selling Guide B3-3.8-02, Rental Income from the Subject Property, dated September 2, 2026. https://selling-guide.fanniemae.com/sel/b3-3.8-02/rental-income-subject-property
- Fannie Mae Selling Guide B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental, dated September 2, 2026. https://selling-guide.fanniemae.com/sel/b3-3.8-03/rental-income-subject-property-short-term-rental
- Fannie Mae Selling Guide B2-2-01, General Borrower Eligibility Requirements, dated September 3, 2025. https://selling-guide.fanniemae.com/sel/b2-2-01/general-borrower-eligibility-requirements
Written by Blake Hermann, Director of Lending, NMLS #2271358, Pillar Mortgage Group, Scottsdale, Arizona.
Equal Housing Opportunity. Informational only, not a commitment to lend. Programs subject to change and borrower qualification. Company NMLS #2700076.
