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in Danville, CA
Danville borrowers face an important choice when financing property: conventional mortgages or investment-focused DSCR loans. Each serves different purposes and qualification criteria.
Conventional loans work well for primary residences and second homes with traditional income verification. DSCR loans cater to real estate investors who want rental property financing based on the property's income potential rather than personal tax returns.
Conventional loans represent the standard mortgage option for most Danville homebuyers. Lenders review your income, employment history, credit score, and debt-to-income ratio to determine eligibility.
These mortgages typically offer the lowest rates when you qualify. They require W-2s, tax returns, and pay stubs during underwriting. Down payments start at 3% for owner-occupied homes, though 20% down avoids mortgage insurance.
Conventional financing works for primary residences, second homes, and investment properties. However, investors must qualify using personal income, which limits how many properties they can finance.
DSCR loans qualify Danville investors based on rental income instead of personal earnings. The lender calculates the debt service coverage ratio by dividing monthly rental income by the mortgage payment.
A DSCR of 1.0 means rental income equals the payment. Ratios above 1.0 show positive cash flow, while ratios below 1.0 may still qualify with larger down payments. No tax returns, W-2s, or employment verification needed.
These loans suit investors with multiple properties, self-employed borrowers with complex tax situations, or anyone wanting to separate investment financing from personal finances. They're not available for primary residences.
Qualification separates these options most clearly. Conventional loans examine your entire financial picture including job history and personal income. DSCR loans focus solely on whether the rental property generates enough income to cover its mortgage.
Rates vary by borrower profile and market conditions, but conventional loans generally offer lower rates. DSCR loans compensate for their simplified qualification with slightly higher rates and minimum down payments typically around 20-25%.
Property type matters too. Conventional financing covers primary homes, second homes, and rentals. DSCR loans work exclusively for investment properties generating rental income. You cannot use a DSCR loan for a Danville home where you plan to live.
Choose conventional financing for your Danville primary residence or when you want the lowest possible rate. This option makes sense if you have stable employment, strong credit, and straightforward income documentation.
DSCR loans excel for investors purchasing rental properties in Danville. They work particularly well if you're self-employed, own multiple rentals, or want to avoid personal income limits on portfolio growth. The property's rental potential becomes your qualification.
Some investors use both loan types strategically. They might secure conventional financing for a property they'll owner-occupy, then use DSCR loans for pure investment acquisitions. Your specific situation determines the best path forward.
No, DSCR loans work only for investment properties that generate rental income. You need conventional financing or another owner-occupied loan program for a primary residence.
Both require good credit, typically 620 minimum. Conventional loans may offer more flexibility at lower credit scores, while DSCR loans often prefer scores above 660 for best pricing.
Lenders use a market rent appraisal or existing lease agreement. The appraiser estimates fair market rent, which becomes the income figure used to calculate your debt service coverage ratio.
Rates vary by borrower profile and market conditions, but DSCR loans typically carry slightly higher rates. The trade-off is simplified qualification without tax returns or employment verification.
Yes, if the property is an investment rental. This strategy helps investors who initially bought with conventional financing but now want to separate their investment and personal finances.