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in Redondo Beach, CA
Redondo Beach investment properties attract two types of buyers. W-2 earners with strong tax returns use conventional loans. Real estate investors who show minimal income on paper need DSCR.
The gap between these products is massive. Conventional loans reward income documentation with lower rates. DSCR loans ignore your tax returns entirely and qualify you on rental income alone.
Conventional loans offer the lowest rates available to investors in Redondo Beach. You'll need 15-25% down for investment properties. Credit scores above 720 unlock the best pricing.
These loans require full income documentation. Lenders verify employment, review tax returns, and calculate debt-to-income ratios. If you show strong W-2 income and clean financials, conventional wins on cost.
DSCR loans flip the qualification script. Your personal income doesn't matter. Lenders only care if the property's rent covers the mortgage payment plus taxes and insurance.
You need a debt service coverage ratio above 1.0. That means monthly rent exceeds monthly housing costs. Most Redondo Beach rentals clear this easily. Rates run 1-2% higher than conventional, but you skip all income verification.
The rate gap matters. A $1M Redondo Beach duplex at 6.5% conventional costs $6,320 monthly. The same loan at 7.5% DSCR runs $6,992. That's $672 more each month, or $8,064 annually.
But DSCR doesn't care about your tax strategy. If you write off everything and show $40K income while owning four rentals, conventional won't approve you. DSCR will, as long as each property's rent covers its debt service.
Use conventional if you're a W-2 employee buying your first or second rental. The rate savings compound over 30 years. Your clean tax returns and steady paycheck make qualification straightforward.
Choose DSCR if you're a serial investor, self-employed, or maximize tax deductions. You'll pay more in interest, but you'll actually get approved. Most experienced investors with multiple properties can't qualify conventionally anymore.
No. DSCR loans only work for investment properties that generate rental income. Primary residences require conventional or FHA financing.
Conventional requires 620 minimum, 720+ for best rates. DSCR typically needs 680 minimum. Higher scores unlock better pricing on both products.
They divide monthly rent by PITIA (principal, interest, taxes, insurance, HOA). A property renting for $4,500 with $4,000 PITIA has a 1.125 DSCR.
Yes, if your income documentation improves. Many investors start with DSCR, then refinance to conventional once they have cleaner tax returns.
DSCR scales better. Conventional caps most borrowers at 4-10 financed properties. DSCR lenders focus on each property's individual cash flow, not total count.