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in Cerritos, CA
Cerritos investors face a choice: long-term rental financing or quick acquisition capital. DSCR loans qualify you on rental income and work for stable cash flow properties. Hard money gets you fast funding for flips or distressed deals but costs more and demands quick repayment.
Both skip W-2 income verification, but they solve different problems. DSCR loans act like traditional mortgages with better rates and 30-year terms. Hard money acts like emergency capital with 6-12 month timelines and steeper costs.
DSCR loans approve you based on whether rent covers the mortgage payment. Lenders calculate a ratio: monthly rent divided by monthly debt. You need a ratio above 1.0, though some lenders go down to 0.75 if you have strong reserves.
Rates run 1-2 points above conventional mortgages. You'll need 20-25% down and a 620+ credit score. Terms stretch to 30 years with fixed or adjustable options. This works for Cerritos rental properties you plan to hold long-term.
Hard money lenders fund based on property value, not your income or the rent. They'll lend 65-75% of after-repair value on fix-and-flip deals. You get approved in days and close in 1-2 weeks. Credit matters less than the deal itself and your exit strategy.
Rates start around 9-12% with 2-5 points upfront. Terms run 6-12 months because lenders expect you to refinance or sell. You need a clear plan to pay off the loan fast. This fits Cerritos properties that need work or situations where speed beats cost.
Cost separates these loans dramatically. DSCR rates mirror conventional mortgages while hard money costs 6+ points more annually. On a $500K loan, that's $30K extra per year in interest alone. Hard money also charges points that DSCR lenders skip.
Timeline flips the equation. Hard money closes in weeks when you need to beat all-cash offers on distressed Cerritos properties. DSCR takes 3-4 weeks but gives you 30 years to pay it back. Pick hard money when speed matters more than cost.
Choose DSCR if you're buying a rental property you'll hold for years. The lower rate saves tens of thousands over time. You need a property that's rent-ready or close to it, since lenders won't fund major rehabs. Works best when you have time to close and want stable monthly payments.
Pick hard money when you're flipping properties or buying distressed homes in Cerritos. You need speed to compete with cash buyers or capital to renovate before refinancing into DSCR. Accept the higher cost as the price of fast execution and flexible underwriting.
Yes, this is a common strategy. Complete renovations, stabilize rent, then refinance into a DSCR loan with better rates and long-term amortization.
Hard money closes in 1-2 weeks versus 3-4 weeks for DSCR. Speed costs you in interest rates and upfront points.
Yes, but hard money often uses broker price opinions for speed. DSCR requires full appraisals with rent schedules and comparable analysis.
DSCR typically requires 620+ credit. Hard money lenders care more about the deal and may approve scores in the 500s with strong collateral.
No, DSCR lenders fund rent-ready properties. Use hard money for rehabs, then refinance to DSCR once the property generates stable rental income.