For STR Investors
Conventional, Second Home, or DSCR — Which Loan Actually Fits Your Short-Term Rental?
Most STR investors get stuck between the same three options, without a clear way to compare them. Here's how to actually think it through.
The loan type matters as much as the rate. Get it wrong and you either overpay in fees you didn't need, or you get denied on a deal that should have worked. Here's the real difference between the three paths.
Option 1
Conventional Investment
- Qualifies OnYour personal income and DTI
- Down PaymentTypically 15-25%
- Best WhenStrong W-2/tax return income, first or second investment property
- Watch ForRental income usually needs a lease or appraisal comparable to count
Option 2
Second Home
- Qualifies OnYour income, with a slightly better rate than investment financing
- Down PaymentMinimum 10%
- Best WhenYou'll genuinely use the property yourself part of the year
- Watch ForOccupancy requirements — can't be run purely as a rental business
Option 3
DSCR
- Qualifies OnThe property's income — actual, projected, or platform data (AirDNA)
- Down PaymentVaries by deal — often 20%, or that's the target
- Best WhenTax returns don't reflect your full picture, or you're scaling past 1-2 properties
- Watch ForRate depends heavily on prepayment penalty terms — with a 3-year prepay, pricing is often close to or even better than conventional. Run your specific numbers.
A quick way to decide
If your tax returns fully reflect your income and this is an early investment property — conventional is usually the simplest, cheapest path.
If you plan to actually use the property yourself for part of the year — second home gets you better terms, as long as you can genuinely meet the occupancy rules.
If your income is complicated, self-employed, or you're past the point where personal DTI can support another mortgage — DSCR removes your personal income from the equation entirely.
A Real Deal
New Airbnb, Seminole — $940,000
Clients had recently sold their business and started a new one, and the new-business debt meant their DTI didn't work on a conventional path. We qualified them using AirDNA-projected income instead — the property's earning potential, not their personal income statement. The 5% seller concessions covered closing costs, with the remaining funds used to buy down the rate to 6.75%.
Not sure which of these actually fits your situation? Send me the numbers and I'll tell you straight — sometimes the answer is conventional, sometimes it's DSCR, and sometimes your existing pre-approval is already the right structure and just needs a second look.