Bank Statement vs. DSCR Loans: Which Is Right for You?

Choosing the right loan can make or break your real estate investment strategy. Two of the most flexible and investor-friendly options today are Bank Statement Loans and DSCR Loans. But which one fits your goals best?

In this guide, we’ll break down the pros, cons, and ideal use cases of both to help you decide confidently. Whether you’re self-employed, scaling a portfolio, or launching your first Airbnb, there’s a strategic financing option waiting for you.

What Are Bank Statement Loans?

Bank Statement Loans are designed for self-employed borrowers who may not show strong income on tax returns but have consistent cash flow through their business accounts.

Key Features:

• Use 12–24 months of business or personal bank statements to verify income
• No W2s or tax returns required
• Available for primary homes, second homes, and investment properties
• Manual underwriting with flexible guidelines

Pros:

• Ideal for self-employed investors and 1099 earners
• Great for showing strong income despite tax deductions
• Can finance a variety of property types, including some primary residences

Cons:

• Typically higher interest rates than conventional loans
• Slower, more manual underwriting process
• Lenders may require CPA-prepared documentation in some cases

✅ Want to explore your options fast? Get matched with a lender today

What Are DSCR Loans?

Debt Service Coverage Ratio (DSCR) Loans focus solely on the property’s income—not the borrower’s.

Key Features:

• No personal income or employment verification
• Approval is based on the property’s rental income vs. its monthly expenses
• Common for 1–4 unit investment properties and short-term rentals

Pros:

• No W2s, no tax returns, no DTI calculations
• Fast approvals and closings
• Perfect for scaling rental portfolios, short-term rentals, and BRRRR investors

Cons:

• Slightly higher interest rates than conventional loans
• Requires rental income to meet DSCR thresholds (usually ≥ 1.2)
• Business-purpose only—cannot be used for primary residences

📈 Thinking of using your property’s cash flow to qualify? Apply for a DSCR loan

Side-by-Side Comparison

Which Loan Should You Choose?

Choose a Bank Statement Loan if:

• You’re self-employed and want to buy a primary residence or second home
• You have strong cash flow but low taxable income
• You need a flexible option for non-investment purchases

Choose a DSCR Loan if:

• You’re buying or refinancing a rental property
• You want no personal income verification
• You’re scaling a portfolio with multiple properties or investing through an LLC

🔍 Still unsure? Let us review your scenario and match you with the right loan.

Real-World Examples

• Rebecca, a freelance graphic designer, used a Bank Statement Loan to buy a second home after being denied by a traditional lender due to complex income.
• Jake, an Airbnb host, scaled from 1 to 5 short-term rentals by leveraging DSCR Loans, which allowed him to qualify based on projected rental income—not his fluctuating 1099 income.

FAQs

Can I qualify for either loan without a W2 job?

Yes. Both loan types are designed for borrowers without traditional employment. DSCR loans don’t require income verification at all, while bank statement loans use deposits to determine eligibility.

Do DSCR loans require a minimum credit score?

Most DSCR lenders require a minimum FICO score between 640–680, with better rates and terms for scores 700+:contentReference[oaicite:0]{index=0}.

Can I use a DSCR loan for a second home?

No. DSCR loans are strictly for non-owner-occupied investment properties:contentReference[oaicite:1]{index=1}.

Which loan closes faster?

DSCR loans often close in 10–21 days, especially with streamlined lenders like Figure:contentReference[oaicite:2]{index=2}. Bank statement loans may take longer due to manual underwriting.

Read Next

• DSCR Loans 101: What Real Estate Investors Need to Know
• Bank Statement Loans for Self-Employed Real Estate Investors
• How to Qualify for a DSCR Loan Without Traditional Income Verification
• From First Rental to Real Portfolio: The DSCR Playbook

Final Thoughts

Both Bank Statement and DSCR Loans offer real estate investors the chance to finance deals without the red tape of traditional lending. The right choice depends on your income type, property goals, and growth strategy.

Whether you’re buying a rental, refinancing for scale, or just starting your journey, understanding these two flexible loan products gives you the edge in today’s competitive market.

👉 Ready to find out which loan fits your needs? Submit your scenario now and get matched with a lender.