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in Chico, CA
Self-employed professionals and real estate investors in Chico often face challenges with traditional mortgage qualifying. Bank Statement Loans and DSCR Loans both offer alternative paths to financing, but they serve distinctly different purposes.
Bank Statement Loans help self-employed borrowers buy primary residences or second homes using bank deposits instead of tax returns. DSCR Loans enable investors to purchase rental properties based solely on the property's income potential.
Understanding which option matches your situation determines whether you can secure financing for your Butte County property goals.
Bank Statement Loans analyze 12 to 24 months of personal or business bank deposits to calculate qualifying income. Lenders typically use 50-75% of average monthly deposits as income, depending on whether you're a sole proprietor or incorporated business owner.
These loans work for self-employed borrowers purchasing primary residences, second homes, or even investment properties in Chico. You can qualify without providing tax returns, which helps business owners who write off significant expenses.
Credit score requirements typically start at 620, though higher scores unlock better terms. Down payments usually range from 10-20% depending on property type and loan amount. Rates vary by borrower profile and market conditions.
DSCR Loans qualify borrowers based exclusively on rental income from the investment property itself. The Debt Service Coverage Ratio compares monthly rental income to the total monthly housing payment including principal, interest, taxes, insurance, and HOA fees.
A DSCR of 1.0 means rent exactly covers the payment. Most lenders require 1.0 or higher, though some accept lower ratios with larger down payments. Your personal income, employment, and tax returns don't factor into approval.
These loans only finance investment properties in Chico and throughout Butte County. Minimum credit scores typically start at 640, with down payments ranging from 20-25% for standard scenarios.
The fundamental difference lies in what income qualifies you. Bank Statement Loans verify your business income through deposits, making them ideal for buying a home you'll live in. DSCR Loans ignore your income entirely and focus on rental property cash flow.
Property use restrictions also differ significantly. You can use Bank Statement financing for your Chico primary residence or vacation home, while DSCR Loans strictly finance rental investments.
Documentation requirements vary as well. Bank Statement Loans need extensive banking records but skip tax returns. DSCR Loans require rent schedules and property appraisals but no personal financial statements beyond credit and assets.
Choose Bank Statement Loans if you're self-employed and buying a home to live in around Chico. This option makes sense when your tax returns show lower income due to business deductions, but your bank deposits demonstrate strong cash flow.
Select DSCR Loans when purchasing Butte County rental properties and you want to avoid personal income documentation. This works especially well for investors with multiple properties, complex tax situations, or those who want streamlined qualification based purely on the deal's numbers.
Some borrowers might qualify for both depending on their purchase goals. A self-employed investor could use Bank Statement financing for a primary residence while using DSCR Loans for rental properties simultaneously.
Yes, Bank Statement Loans can finance investment properties, though DSCR Loans often provide better terms for pure rentals. Bank Statement works when you want to use your business income to qualify rather than the property's rental income.
Rates vary by borrower profile and market conditions. Generally, stronger DSCR ratios or higher bank statement deposits can help secure more competitive pricing within each program.
Yes, both can finance 2-4 unit properties. Bank Statement Loans require you to occupy one unit, while DSCR Loans treat all units as rental income without occupancy requirements.
DSCR Loans don't require personal income verification, but you'll need to document the property's rental income through lease agreements or rent schedules. Your personal finances aren't evaluated.
DSCR Loans often close slightly faster since they require less personal financial documentation. Bank Statement Loans need thorough analysis of 12-24 months of statements, which can add processing time.