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in Avenal, CA
Avenal real estate investors face a choice between two non-QM financing paths. DSCR loans use rental income to qualify, while hard money lenders fund based on property value alone.
Both skip traditional employment verification, but they serve different investment timelines. One finances long-term rentals. The other funds quick flips and rehabs.
DSCR loans qualify you based on a property's rental income divided by its mortgage payment. Lenders want a ratio above 1.0, meaning rent covers the debt. You never submit tax returns or pay stubs.
These loans work for 30-year rentals with rates typically 1-2% above conventional. You need 20-25% down and a credit score around 640. Closing takes 21-30 days, similar to traditional mortgages.
Hard money lenders fund based on after-repair value, not your income or credit. They'll loan 65-75% of what the property will be worth after renovations. Approval happens in days, funding in 7-14 days.
These are 6-24 month bridge loans with rates of 9-14% plus 2-4 points upfront. You pay interest-only monthly, then refinance or sell. Hard money works for properties needing major rehab or quick closings.
Timeline separates these loans. DSCR financing takes 3-4 weeks and you hold for years. Hard money closes in under two weeks but you must exit in 6-24 months through sale or refinance.
Cost structures differ completely. DSCR loans charge lower rates over decades. Hard money hits you with high rates and points upfront but for a short period. A flip might cost 12% annually but you only pay it for eight months.
Choose DSCR if you're buying a rental that's already livable or needs minor cosmetic work. The property must generate enough rent to cover the mortgage. This works for buy-and-hold investors building passive income.
Pick hard money when you need fast funding for a property most lenders won't touch. Maybe it needs a new roof, major systems work, or you're competing with cash buyers. You profit on the flip or refinance into DSCR once renovations finish.
Yes, this is a common strategy. You buy and renovate with hard money, then refinance to a DSCR loan once the property is rent-ready and occupied.
Hard money lenders barely check credit since they rely on property value. DSCR loans typically require 640+ credit scores for approval.
Yes, neither requires you to live in California. Both focus on the property, not your residence location or employment situation.
You'll face extension fees and potential foreclosure. Always have a clear exit plan before taking hard money financing.
Yes, lenders use projected market rent based on comparable properties. You don't need an actual tenant in place at closing.