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in Delano, CA
Real estate investors in Delano have two powerful financing options when traditional mortgages don't fit. DSCR loans and hard money loans both serve investors, but they work in completely different ways and suit different investment strategies.
Understanding the differences between these two loan types helps you choose the right financing for your Delano property project. Your timeline, exit strategy, and property condition determine which option makes more sense for your situation.
DSCR loans qualify you based on the rental income your Delano property generates, not your personal income. Lenders calculate the debt service coverage ratio by dividing monthly rental income by monthly mortgage payment, typically requiring a ratio of 1.0 or higher.
These loans work like conventional mortgages in many ways—30-year terms, predictable monthly payments, and rates competitive with other investor loans. You'll need a credit score typically above 620 and a down payment of 20-25% for most properties.
DSCR financing works best for buy-and-hold investors purchasing rental properties in Delano. The property must be rent-ready or already generating income, making this a poor fit for major renovation projects.
Hard money loans focus almost entirely on the property's current or future value, not your income or credit score. These short-term loans typically run 6-24 months and are designed to get you capital quickly for property acquisition or renovation in Delano.
Approval happens fast—often within days instead of weeks. Hard money lenders care most about the property's value and your exit strategy, whether that's selling after renovation or refinancing into a DSCR or conventional loan.
The trade-off for speed and flexibility is higher cost. Hard money rates typically run 8-15%, with points charged at closing. Monthly payments may be interest-only, keeping costs manageable during your project timeline.
Timeline separates these two options more than anything else. DSCR loans take 3-4 weeks to close and provide long-term financing, while hard money closes in days but requires refinancing or sale within 1-2 years.
Property condition matters differently for each loan type. DSCR lenders need rent-ready properties that pass standard appraisals. Hard money lenders fund distressed properties, evaluating the after-repair value instead of current condition.
Cost structures differ significantly. DSCR loans offer rates comparable to conventional investor loans, while hard money costs substantially more but provides speed and flexibility. Your Delano project timeline and property condition determine which cost structure makes sense.
Credit requirements vary widely. DSCR loans typically require 620+ credit scores and documented rental income. Hard money lenders may work with lower credit scores or past financial issues, focusing instead on equity and exit strategy.
Choose DSCR financing when you're buying a rental property in Delano that's already generating income or ready to rent immediately. This option makes sense for buy-and-hold investors who want predictable payments and long-term financing without using personal income for qualification.
Hard money works better for fix-and-flip projects, distressed properties needing major renovation, or situations requiring extremely fast closing. If your Delano property needs significant work before it can produce rental income, hard money bridges that gap.
Many successful investors use both loan types strategically. Start with hard money to acquire and renovate a Delano property, then refinance into a DSCR loan once renovations complete and the property generates rental income. This approach combines speed with long-term stability.
Yes, both DSCR and hard money lenders work with first-time investors. Hard money may be easier to qualify for initially, while DSCR requires the property to generate sufficient rental income to cover the mortgage payment.
DSCR loans typically require 20-25% down for investment properties. Hard money lenders often fund 70-80% of purchase price or after-repair value, requiring similar equity but calculated differently based on the project.
Hard money loans close much faster, often within 3-7 days. DSCR loans follow traditional mortgage timelines, typically taking 3-4 weeks to close with full documentation and appraisal requirements.
Yes, this is a common strategy. Complete renovations using hard money, stabilize rental income, then refinance into a DSCR loan for lower rates and long-term financing. Most lenders require 6-12 months of rental history.
Both loan types work throughout Delano, though lenders evaluate individual properties. Hard money lenders focus on resale value and market conditions. DSCR lenders need evidence of rental demand and comparable rental rates in the area.