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in Lomita, CA
Lomita's rental market attracts both traditional homebuyers and investors. Conventional loans serve owner-occupants and small-scale landlords who qualify on W-2 income. DSCR loans target investors who want financing based purely on rental cash flow, not tax returns.
The choice hinges on whether you're buying to live or strictly for investment returns. Each loan type uses completely different underwriting criteria. Your employment status and property plans determine which path makes sense.
Conventional loans require proof of personal income through W-2s, tax returns, and employment verification. You need 620+ credit for most programs, though 740+ unlocks the best rates. Down payments start at 3% for owner-occupants, 15% for investors buying rental properties.
These loans follow Fannie Mae and Freddie Mac guidelines. Debt-to-income ratios cap at 50% in most cases. You can finance up to 10 properties total across your portfolio, though multi-property investors face stricter reserve requirements.
DSCR loans skip personal income verification entirely. Approval depends on one metric: monthly rent divided by monthly mortgage payment. Most lenders want 1.0+ DSCR, meaning rent covers the full payment. Some programs accept 0.75 DSCR if you put more down.
Credit minimums run 660-680 depending on the lender. Down payments start at 20%, often 25% for best terms. There's no hard limit on number of properties — useful if you already own multiple rentals and can't qualify conventional due to DTI.
Conventional loans typically offer rates 0.5-1.5% lower than DSCR. That gap reflects the lower risk of verified income borrowers. A half-point rate difference on a $600K loan costs roughly $180/month, or $2,160 annually.
DSCR loans don't care about your job, tax deductions, or 1099 income complexity. Conventional loans require stable employment and clean tax returns. If you're self-employed with lots of write-offs, your qualifying income may look weak on conventional underwriting even if cash flow is strong.
Property type matters too. Conventional loans work for 1-4 units. DSCR loans handle non-warrantable condos and unique properties that Fannie Mae won't touch. You're trading rate for flexibility and speed.
Choose conventional if you're an owner-occupant or W-2 investor with clean income docs. The rate savings alone justify the paperwork hassle. If you plan to live in the property even temporarily, conventional is the only real option for low down payments.
Go DSCR if you're a pure investor who can't or won't verify income. Self-employed buyers with heavy tax deductions often qualify for larger loans via DSCR than conventional. Same for portfolio investors hitting DTI limits — DSCR doesn't add to your debt ratios.
Lomita's rental rates make DSCR viable for cash-flowing properties. Run the numbers: if market rent covers your projected payment by 10-25%, you'll likely hit the required DSCR. Below that threshold, you're either putting down 30%+ or going conventional.
No. DSCR is strictly for investment properties with arm's-length leases. If you occupy the property at all, you need a conventional owner-occupant loan.
DSCR often closes quicker since there's no employment verification or income documentation. Conventional takes longer if you're self-employed or have complex income sources.
Yes. Both programs require full appraisals. DSCR lenders also need a rent schedule or lease to verify the property's income potential.
Yes, via cash-out refinance. Many investors start conventional for the lower rate, then refi to DSCR later to free up DTI for additional purchases.
You'll need a larger down payment to lower the loan amount and monthly payment. Some lenders accept 0.75 DSCR with 30% down.