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in Rancho Palos Verdes, CA
If you're self-employed or investing in Rancho Palos Verdes real estate, traditional W-2 income verification won't work. Bank statement and DSCR loans both skip tax returns, but they solve different problems.
Bank statement loans use your personal deposits to prove income. DSCR loans ignore your income entirely and qualify you based on what the property can rent for.
The choice depends on whether you're buying to live in or to rent out. Most borrowers need one or the other, rarely both.
Bank statement loans let self-employed borrowers use 12 or 24 months of business or personal bank deposits to qualify. Underwriters calculate income by averaging monthly deposits, sometimes with a write-down for business expenses.
You can buy primary residences, second homes, or investment properties. Rates run higher than conventional loans but lower than hard money. Credit score minimums start around 620, though 680+ gets better pricing.
This works for business owners, 1099 contractors, and anyone whose tax returns show less income than they actually earn. The coastal properties in Rancho Palos Verdes often require jumbo loan amounts, which most bank statement lenders handle.
DSCR loans qualify you based solely on rental income versus the mortgage payment. Lenders calculate the debt service coverage ratio by dividing monthly rent by the total monthly debt. A ratio above 1.0 means the property pays for itself.
You don't provide pay stubs, W-2s, or personal income documentation. Some lenders approve deals with ratios below 1.0 if you have reserves. Investment properties only—no primary residences or second homes.
This loan fits landlords adding to their portfolio or buyers converting properties to rentals. Rancho Palos Verdes has strong rental demand from families wanting coastal schools without buying at full market prices.
Bank statement loans require you to live in or use the property. DSCR loans require you to rent it out. That's the clearest dividing line between these programs.
Bank statement underwriting reviews your personal finances—credit, deposits, assets. DSCR underwriting focuses on the property's rent potential and your reserves. Your personal income doesn't matter on a DSCR loan.
Both allow non-owner occupied purchases, but bank statement loans let you choose. DSCR loans force you into landlord mode from day one. Rates vary by borrower profile and market conditions, but DSCR rates often run slightly higher due to investment property risk.
Choose bank statement loans if you're buying a home to live in and your tax returns don't show enough income. This includes self-employed borrowers, business owners writing off expenses, and contractors with fluctuating 1099 income.
Choose DSCR loans if you're buying rental property and don't want to document personal income. This works for investors with strong rental comps, landlords expanding portfolios, or buyers converting properties to income producers.
Some Rancho Palos Verdes buyers start with bank statement loans for a primary residence, then refinance into DSCR loans after converting to rentals. Others use DSCR from purchase if they're acquiring investment property outright.
Yes, bank statement loans work for investment properties. But if you're not occupying it, DSCR loans usually offer simpler underwriting since they ignore your personal income entirely.
Both typically require 15-25% down for investment properties. DSCR loans may ask for more reserves since there's no personal income verification as a backup.
DSCR loans often close faster because there's less personal documentation. Bank statement loans require 12-24 months of statements, which takes time to review and verify.
Yes, many lenders approve ratios as low as 0.75 if you have strong credit and sufficient reserves. You'll need more cash on hand to offset negative cash flow.
Use DSCR loans if the rental income covers the mortgage. Use bank statement loans if you need to combine rental income with your business income to qualify.