Loading
in Lafayette, CA
Lafayette investors face a key decision when financing rental properties or renovation projects. DSCR loans and hard money loans serve different investment strategies, with distinct timelines and qualification requirements.
DSCR loans focus on long-term rental income, while hard money loans provide quick funding for short-term projects. Understanding these differences helps Contra Costa County investors choose the right financing tool for their specific goals.
DSCR loans qualify investors based on rental property income rather than personal tax returns. The property's rental income must cover the mortgage payment, typically requiring a ratio of 1.0 or higher.
These loans work well for buy-and-hold investors purchasing Lafayette rental properties. Terms typically span 15-30 years with fixed or adjustable rates, similar to conventional mortgages but without personal income verification.
Closing takes 30-45 days on average. Credit scores of 620 or higher are typically required, along with down payments of 20-25% for investment properties in Contra Costa County.
Hard money loans provide fast funding based primarily on property value rather than borrower income or credit. These short-term loans typically last 6-24 months and focus on the asset's current or after-repair value.
Lafayette investors use hard money for fix-and-flip projects, urgent acquisitions, or bridge financing. Approval can happen in days, with funding in 1-2 weeks, making them ideal for competitive situations or time-sensitive opportunities.
Interest rates run higher than traditional loans, typically 8-15%, with points charged upfront. Loan-to-value ratios usually max out at 65-75% of the property's value, requiring larger down payments.
Timeline separates these options dramatically. Hard money closes in weeks; DSCR loans take over a month. Hard money serves short-term projects with exit strategies, while DSCR loans finance long-term rental holds.
Cost structures differ significantly. DSCR loans offer lower rates comparable to conventional mortgages, while hard money charges premium rates for speed and flexibility. Hard money also includes points and fees that increase upfront costs.
Qualification varies by focus. DSCR loans require decent credit and proven rental income from the property. Hard money lenders care most about the Lafayette property's value and your exit strategy, accepting lower credit scores.
Choose DSCR loans when purchasing Lafayette rental properties you plan to hold long-term. They make sense for cash-flowing properties where you want lower monthly payments and stable financing over years.
Hard money fits renovation projects, competitive purchases needing quick closings, or bridge financing until permanent financing becomes available. The higher cost justifies itself when speed creates opportunity or a quick flip generates profit.
Many Contra Costa County investors use both at different times. Start a fix-and-flip with hard money, then refinance into a DSCR loan if you decide to keep the property as a rental instead of selling.
Yes, this is common. Many investors use hard money for renovations, then refinance into a DSCR loan for long-term rental financing once the property is stabilized and generating income.
DSCR loans offer significantly lower rates, typically similar to conventional mortgages. Hard money rates run higher due to the short-term nature and faster approval process. Rates vary by borrower profile and market conditions.
Yes. DSCR loans typically require 20-25% down for investment properties. Hard money usually requires 25-35% down based on the property's current or after-repair value.
Hard money lenders focus on property value over credit scores, making them more accessible for investors with credit challenges. DSCR loans typically require credit scores of 620 or higher.
DSCR loans are specifically for investment properties that generate rental income. Hard money also focuses on investment properties and commercial projects rather than primary residences.