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in Downey, CA
Downey investors face a clear fork: traditional conventional financing or investor-focused DSCR loans. The right choice depends on whether you're using W-2 income or rental cash flow to qualify.
Conventional loans reward strong personal finances with lower rates. DSCR loans ignore your tax returns and underwrite the property itself. Most Downey investors need one or the other — rarely both.
Conventional loans require full income verification through W-2s, tax returns, and pay stubs. Lenders want 620+ credit, debt-to-income under 50%, and typically 15-25% down for investment properties in Downey.
You'll get the lowest rates available if your finances are clean. These loans work for investors with stable employment who can show strong personal income. Fannie Mae caps you at 10 financed properties total.
DSCR loans qualify you based on rent versus mortgage payment — nothing else. No tax returns. No employment verification. Lenders only care if the property generates enough rent to cover the debt.
You'll pay higher rates than conventional, usually 1-2% more. Minimum 20% down, sometimes 25% depending on credit and DSCR ratio. No property limit. Perfect for self-employed investors or those building large portfolios in Downey.
Conventional loans underwrite you personally. DSCR loans underwrite the rental property. That's the entire ballgame. If you're a strong W-2 borrower, conventional wins on rate. If you show low income on tax returns but own solid rentals, DSCR is your only path.
Down payment requirements differ by about 5%. Conventional investment properties need 15% down (20% if you want better rates). DSCR starts at 20% and goes to 25% for marginal deals. Rate difference runs 1-2% higher on DSCR. Rates vary by borrower profile and market conditions.
Use conventional if you're a W-2 earner buying your first few Downey rentals. You'll save thousands in interest with lower rates. Use DSCR if you're self-employed, write off heavy expenses, or already own 10 properties. Don't force conventional if your tax returns show low income.
We see this decision break on tax strategy. Investors who maximize write-offs can't qualify conventionally even with strong cash flow. DSCR ignores your 1040 entirely. If Downey rents cover the payment by 25% or more, you're approved.
No. DSCR loans are investment property only. You need rental income to qualify, which means the property can't be your primary residence.
Most lenders want 1.0 or higher, meaning rent covers the mortgage payment. Some allow 0.75 with larger down payments and strong credit.
Usually yes. DSCR lenders typically want 680+ credit, while conventional investment loans start at 620 for Fannie Mae programs.
Yes. Investors often start conventional for better rates, then refinance to DSCR when building portfolios beyond 10 properties.
DSCR often closes quicker since there's no income verification. Conventional requires full employment and tax return review, adding time.