For real estate investors who don’t qualify for traditional mortgages, DSCR loans and bank statement loans are two popular alternative financing options. But which one is right for your investment strategy?
In this comprehensive 3,500+ word guide, we’ll compare every aspect of these loan programs to help you make the best decision for your real estate portfolio.
Key Differences at a Glance
Feature | DSCR Loan | Bank Statement Loan |
---|---|---|
Qualification Basis | Property income | Personal bank deposits |
Best For | Rental properties | Fix-and-flips, BRRRR |
Credit Score | 580+ | 660+ |
Down Payment | 20-30% | 20-25% |
Interest Rates | 6.5-9% | 7-10% |
Loan Terms | Up to 30 years | 12-24 months (often) |
What Is a DSCR Loan?
A Debt Service Coverage Ratio (DSCR) loan qualifies borrowers based on a rental property’s cash flow rather than personal income.
Key Features
- No tax returns or W-2s required
- Minimum 580 credit score
- 1.0+ DSCR ratio required
- Up to 30-year terms available
- Ideal for long-term rental investors
Pros & Cons
✅ Pros:
- No personal income verification
- Can finance unlimited properties
- Longer terms improve cash flow
❌ Cons:
- Higher rates than conventional loans
- Larger down payments required
- Only for income-producing properties
What Is a Bank Statement Loan?
Bank statement loans use 12-24 months of personal or business bank statements instead of tax returns to verify income.
Key Features
- Uses deposits to calculate income
- Minimum 660 credit score
- 10-20% down payment
- Short-term (1-5 years) common
- Ideal for flippers and self-employed
Pros & Cons
✅ Pros:
- Great for self-employed investors
- Faster access to capital
- Can use for primary residences
❌ Cons:
- Higher interest rates
- Shorter repayment terms
- Personal liability required
5 Key Factors to Compare
1. Qualification Requirements
DSCR Loans:
- 580+ credit score
- 1.0+ DSCR ratio
- 20-30% down payment
Bank Statement Loans:
- 660+ credit score
- 12-24 months bank statements
- 20-25% down payment
Winner: DSCR loans for lower credit requirements
2. Interest Rates & Fees
DSCR Loans:
- 6.5-9% interest
- 2-5 points in fees
Bank Statement Loans:
- 7-10% interest
- 1-3 points in fees
Winner: DSCR loans for slightly better rates
3. Loan Terms
DSCR Loans:
- 5-30 year terms
- Fixed & adjustable options
Bank Statement Loans:
- 12-60 month terms
- Often balloon payments
Winner: DSCR loans for long-term stability
4. Property Types
DSCR Loans:
- Rental properties only
- 1-4 units typically
Bank Statement Loans:
- Primary, secondary, investment
- Fix-and-flips allowed
Winner: Bank statement loans for flexibility
5. Speed & Ease of Approval
DSCR Loans:
- 2-4 week processing
- Property-focused underwriting
**Bank Statement Loans:
- 1-2 week approvals
- Deposit verification focus
Winner: Bank statement loans for speed
When to Choose Each Loan Type
Best for DSCR Loans When:
✔ Building long-term rental portfolio
✔ Self-employed with low documented income
✔ Need non-recourse financing
✔ Want 30-year amortization
Best for Bank Statement Loans When:
✔ Flipping properties quickly
✔ Self-employed with strong cash flow
✔ Need funds for primary residence
✔ Require fastest possible approval
Current Rates & Terms (2025)
DSCR Loan Rates:
- 6.5-8.5% (fixed)
- 25-30 year amortization
- 1.0-1.25 DSCR required
Bank Statement Loan Rates:
- 7.5-10%
- 12-60 month terms
- 10-20% down payment
How to Apply: Step-by-Step
DSCR Loan Process
- Find DSCR-friendly lender
- Submit property financials
- Get pre-approved
- Property appraisal
- Underwriting (2-4 weeks)
- Close and fund
Bank Statement Loan Process
- Gather 12-24 months statements
- Find portfolio lender
- Quick pre-approval (1-3 days)
- Property valuation
- Fast underwriting (1-2 weeks)
- Close with attorney
Top Lender Recommendation
🥇 Truss Financial Group – Best for DSCR Loans
✅ 580+ credit scores accepted
✅ 1.0 DSCR minimum
✅ Up to 80% LTV
✅ Fast 10-21 day approvals
👉 Get Pre-Approved for a DSCR Loan
FAQ: Common Questions
❓ Can I combine both loan types?
Yes! Many investors use bank statement loans for acquisitions then refinance into DSCR loans.
❓ Which has lower closing costs?
Bank statement loans typically cost 1-2% less in fees.
❓ Do I need an LLC for either loan?
Helpful but not required. Some lenders allow LLC borrowing.
❓ Which is better for first-time investors?
DSCR loans provide more stability for new investors.
Expert Tips for Approval
- For DSCR Loans:
- Show strong rental comps
- Use professional management
- Keep 6+ months reserves
- For Bank Statement Loans:
- Avoid large undocumented deposits
- Show consistent cash flow
- Explain any irregularities
🚀 Ready to Finance Your Next Investment?
Both DSCR and bank statement loans offer unique advantages. For long-term rental investors, DSCR loans from Truss Financial Group provide the most flexibility: