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in Fresno, CA
Fresno investors have two main paths when traditional mortgages don't work: DSCR loans and hard money. One focuses on rental income, the other on speed and equity.
Both skip W-2 verification, but they serve different purposes. DSCR works for buy-and-hold investors with cash-flowing properties. Hard money fits fix-and-flip deals where time matters more than rate.
DSCR loans qualify you based on rental income instead of your tax returns. If the property generates enough rent to cover the mortgage payment, you can get approved without proving W-2 income.
Lenders calculate the debt service coverage ratio by dividing monthly rent by the mortgage payment. A ratio above 1.0 means the property pays for itself. Rates run 1-2% higher than conventional loans, but terms stretch 30 years like traditional mortgages.
You need 20-25% down and a credit score around 620. Closing takes 30-45 days since underwriters still verify the property value and rental potential through appraisals and rent comparables.
Hard money loans fund in 7-14 days based almost entirely on property value. Your credit score and income barely matter if you have enough equity in the deal.
These loans run 9-14% interest with 2-5 points upfront. Terms max out at 12-24 months because lenders expect you to flip the property or refinance into permanent financing.
You need 25-35% equity in the deal, measured as loan-to-value. Many hard money lenders in Fresno focus on distressed properties where traditional appraisals don't work. They fund based on after-repair value instead of current condition.
Speed separates these loans first. Hard money closes in under two weeks. DSCR takes a month or more because underwriters verify rental income and run full appraisals.
Cost structure flips the equation. DSCR rates sit around 7-9% with minimal points. Hard money hits 9-14% plus 2-5 points upfront, meaning you pay $20,000-$50,000 in fees on a $1 million loan.
Timeline matters most. DSCR works for long-term holds with 30-year amortization. Hard money forces an exit in 12-24 months through sale or refinance. Miss that window and you face default or painful extension fees.
Choose DSCR if you plan to rent the property for years. The lower rate and 30-year term make monthly payments manageable. You need a property that already rents or will rent near market rates.
Pick hard money when you need to close fast on a flip or the property needs major work. Competing against cash buyers in Fresno? Hard money lets you waive financing contingencies. Just make sure your exit strategy is solid before you sign.
Many investors use both strategically. Hard money funds the purchase and renovation. Then they refinance into a DSCR loan once the property is rent-ready and appraised at the new value.
No, DSCR lenders require rent-ready properties with documented rental income. They won't fund major renovations or properties in uninhabitable condition.
You'll pay extension fees, often 1-2% of the loan amount per month. Some lenders force a sale or foreclose if you can't refinance or sell within the term.
DSCR costs less if you hold the property beyond 18 months. Hard money's high rates and points only make sense for short holds under a year.
Most check credit but don't require high scores. A 580 can work if you have enough equity. They care more about the property value and your exit plan.
Yes, that's a common strategy. Complete renovations, get a new appraisal showing higher value, then refinance into a DSCR loan with lower rates and longer terms.