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in McFarland, CA
McFarland real estate investors have two powerful financing options when traditional mortgages don't fit. DSCR loans and hard money loans both serve investors, but they solve different problems and work best in distinct situations.
DSCR loans focus on rental property cash flow for long-term holdings. Hard money loans emphasize the property's value for quick transactions and renovations. Understanding these differences helps you choose the right tool for your investment goals in Kern County.
DSCR loans qualify you based on rental income, not your W-2 or tax returns. Lenders calculate the property's monthly rent against its mortgage payment and expenses. A DSCR of 1.0 or higher means the property covers its own costs.
These loans work as traditional 30-year mortgages with competitive rates. You can finance single-family rentals, multi-family properties, and investment portfolios throughout McFarland. The property becomes the income source that qualifies the loan.
DSCR financing suits investors building rental portfolios without job income verification. You'll pay slightly higher rates than conventional loans, but you gain the ability to finance multiple properties based on their performance, not your personal earnings.
Hard money loans provide fast capital based on property value, not your finances or the property's income. These short-term loans typically last 12-24 months and fund quickly, often closing in days rather than weeks.
Lenders focus on the after-repair value of McFarland properties. If you're buying a distressed home to renovate and flip, hard money bridges the gap until you sell or refinance. The loan is secured entirely by the real estate asset.
These loans carry higher interest rates and fees than long-term financing. You're paying for speed, flexibility, and the ability to close without extensive underwriting. Hard money works best when time is critical or the property needs substantial work before traditional financing is possible.
Timeline separates these two options dramatically. DSCR loans take 3-4 weeks to close and provide 30-year financing. Hard money closes in 5-10 days but requires full repayment or refinancing within 1-2 years.
Rate structures differ substantially. DSCR loans typically run 1-2% above conventional rates with standard closing costs. Hard money charges 9-12% interest plus 2-5 points upfront, reflecting the short-term risk and speed.
Qualification focuses on different factors. DSCR lenders analyze rent rolls and property cash flow. Hard money lenders evaluate current property value and projected after-repair value. Neither requires extensive personal income documentation.
Choose DSCR loans when you're acquiring rental properties to hold in McFarland. If the property generates enough rent to cover its expenses and you want traditional mortgage terms, DSCR financing provides the best cost structure for long-term ownership.
Select hard money when speed matters or the property needs work. Buying at auction, competing in a hot market, or purchasing a fixer-upper all favor hard money. Plan your exit strategy before closing, whether that's a sale, traditional refinance, or DSCR loan conversion.
Many investors use both strategically. Hard money acquires and renovates the property quickly. Once renovations are complete and tenants are in place, you refinance into a DSCR loan for permanent financing. This combination maximizes flexibility while minimizing long-term costs.
DSCR loans work poorly for flips because they're designed for rental income over 30 years. Hard money is the standard choice for fix-and-flip projects due to its short-term structure and faster closing.
DSCR loans typically require 20-25% down on investment properties. Hard money lenders usually require 10-20% down but focus more on the property's after-repair value than the initial purchase price.
Hard money loans can close in 5-10 business days when needed. DSCR loans follow traditional mortgage timelines of 3-4 weeks, requiring appraisals, title work, and more extensive documentation.
DSCR loans typically require 660+ credit scores. Hard money lenders are more flexible with credit since they rely on property value, though better credit can improve your terms and rates.
Yes, this is a common strategy. Complete your renovations, place tenants, and establish rental income. Then refinance into a DSCR loan for lower rates and long-term financing once the property performs.