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in Lakewood, CA
Lakewood investors face a choice between conventional financing and DSCR loans when buying rental properties. The right option depends on whether you qualify based on W-2 income or want approval based purely on rental cash flow.
Conventional loans work for owner-occupants and investors who can verify income traditionally. DSCR loans skip personal income verification entirely, qualifying you on the property's rental income instead.
Conventional loans are backed by Fannie Mae or Freddie Mac, typically requiring 620+ credit and full income documentation. Rates are competitive because these loans carry less lender risk than non-QM products.
You can use conventional financing for primary homes, second homes, or investment properties up to 10 total financed properties. Down payments start at 3% for owner-occupants, 15-25% for investment properties.
DSCR loans qualify investors based on debt service coverage ratio—the rental income divided by the mortgage payment. Lenders typically want a ratio of 1.0 or higher, meaning rent covers the full payment.
These loans require 20-25% down and don't ask for tax returns, W-2s, or employment verification. You can close in an LLC and finance unlimited rental properties without hitting Fannie Mae's 10-property cap.
The fundamental split is qualification method. Conventional loans underwrite you—your credit, income, and debt-to-income ratio. DSCR loans underwrite the property's rental income against its mortgage payment.
Rate difference runs 0.75-1.5% in most markets. A conventional loan might price at 7%, while the same DSCR loan sits at 8%. That spread costs roughly $150/month per $200K borrowed, but DSCR lets you buy without showing personal income.
Choose conventional if you have W-2 income, clean tax returns, and want the lowest rate. It's the better option for first-time investors with 1-4 properties who can qualify traditionally.
DSCR makes sense for self-employed investors with complex returns, portfolio landlords beyond 10 properties, or anyone who wants to qualify on cash flow alone. You pay more in rate but gain flexibility and speed.
Yes, but you'll pay a rate premium over conventional. First-time investors with W-2 income usually save money going conventional unless their debt-to-income ratio is too high.
Most lenders want 1.0 or higher, meaning monthly rent covers the mortgage payment. Some allow 0.75 with larger down payments and higher rates.
No, conventional loans require individual borrowers. You can transfer to an LLC after closing, but you must qualify and close in your personal name.
Rates run 0.75-1.5% higher. On a $400K loan, that's roughly $250-500 more per month in principal and interest compared to conventional financing.
Yes, but you need 12-24 months of landlord history documented on tax returns. DSCR loans count rental income immediately based on an appraisal rent schedule.