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in Cudahy, CA
Cudahy investors face a choice: finance with conventional income verification or let the property qualify itself. Most owner-occupants pick conventional. Most investors with multiple properties pick DSCR.
The split comes down to whether you're showing W-2 income or rental income on your tax returns. Conventional lenders want to see your personal earnings. DSCR lenders only care if the rent covers the mortgage.
Conventional loans deliver the lowest rates and smallest down payments for borrowers with documented W-2 or 1099 income. You need 620+ credit and proof your income covers all debts including the new mortgage.
Fannie Mae and Freddie Mac set the rules. That means debt-to-income limits around 50%, employment history checks, and appraisal requirements. Investment properties need 15-25% down depending on how many you already own.
Rates beat DSCR by 75-150 basis points because these loans carry less risk for lenders. If you can document steady income and keep your DTI clean, conventional saves thousands over the loan term.
DSCR loans skip personal income verification entirely. Lenders calculate the property's monthly rent against its monthly debt service. If rent covers the payment by 1.0x to 1.25x, you qualify.
These loans work for investors who write off so much income that conventional DTI calculations fail. Self-employed borrowers, portfolio holders, and anyone banking rental losses for tax purposes find DSCR easier than explaining Schedule C deductions to underwriters.
Expect 20-25% down, rates 1-2% higher than conventional, and property requirements like single-family or 2-4 units. No employment letters. No tax return analysis. Just an appraisal and a rent schedule.
Income verification splits these products completely. Conventional underwrites you as a borrower. DSCR underwrites the property as an income source. That difference cascades into every approval factor.
Rates vary by borrower profile and market conditions, but DSCR consistently prices higher because it's non-QM. You pay for the flexibility of no income docs. Down payment floors stay similar, though DSCR rarely allows less than 20%.
Conventional caps how many financed properties you can carry (typically 10). DSCR lenders don't count existing mortgages against you the same way. If you're scaling a rental portfolio past 4-5 properties, DSCR becomes the only path forward.
Pick conventional if you're buying your first rental or you're W-2 employed with clean tax returns. The rate savings compound over 30 years. Run the numbers: even 1% lower rates mean $200+ monthly savings on a $400k loan.
Pick DSCR if you own multiple rentals, show net losses on Schedule E, or work 1099 with heavy write-offs. The underwriting speed and lack of income hassle outweigh the rate premium when conventional lenders keep asking for more documentation.
Cudahy's rental market supports both strategies. Properties here attract long-term tenants, so DSCR ratios work. But if you qualify conventionally, take the cheaper money. Save DSCR for deal four or five when your tax returns stop cooperating.
Yes, but you'll pay higher rates than conventional. If you have W-2 income and can qualify conventionally, that's the better financial move for property one.
Most lenders want 1.0 to 1.25 depending on credit and down payment. Higher ratios unlock better pricing and lower down payment options.
Yes, but you need documented rental history or a signed lease. DSCR skips this and just uses market rent from the appraisal.
DSCR typically closes in 14-21 days because there's no income verification. Conventional takes 21-30 days due to employment and tax return checks.
Yes, investors do this when they want cash-out or their income no longer qualifies conventionally. Expect higher rates but simpler documentation.