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in Sierra Madre, CA
Sierra Madre's tight inventory and high property values push investors toward creative financing. DSCR loans and hard money serve different purposes, and choosing wrong costs you thousands.
DSCR loans fund rentals based on cash flow. Hard money funds quick acquisitions and rehabs using the property as collateral.
Most Sierra Madre investors use hard money to buy distressed properties, then refinance into DSCR loans once tenants move in. The two loans complement each other more than compete.
DSCR loans qualify you on rental income alone. Lenders calculate your debt service coverage ratio by dividing monthly rent by the mortgage payment.
You need a ratio above 1.0 for most approvals, though some lenders go to 0.75. Rates run 7-9% with 20-25% down, and terms stretch 30 years.
These work for buy-and-hold investors who want stable, long-term financing. No tax returns, no employment verification, no income documentation beyond a lease or appraisal rent schedule.
Sierra Madre's rental demand supports strong DSCR ratios. Single-family homes here rent well to families priced out of ownership.
Hard money lenders fund deals in days, not weeks. They care about the property's value and your exit strategy, not your credit score or income.
Rates run 9-12% with 2-4 points upfront. Terms last 6-24 months because these are bridge loans, not permanent financing.
You'll put down 20-30% depending on the deal. Lenders focus on after-repair value when funding fix-and-flip projects.
Sierra Madre sees limited hard money activity because distressed inventory is scarce. When older homes hit the market needing work, these loans move fast.
Hard money costs more but closes faster. DSCR loans cost less but require stabilized rental income and take 30-45 days to fund.
Hard money works for acquisitions, rehabs, and flips. DSCR loans work for rental properties with tenants already in place or market rents documented by appraisal.
You can't hold hard money long-term without bleeding cash on interest. DSCR loans are designed for 5-10 year holds with competitive rates.
Credit matters differently. Hard money lenders overlook bad credit if the deal works. DSCR lenders want 620+ scores and reasonable credit history.
Choose hard money when you're buying a property that needs work or competing against cash offers. Speed matters more than cost on these deals.
Choose DSCR when you're buying a rental property that's already habitable. The lower rate saves you thousands annually on a long-term hold.
Many Sierra Madre investors use both in sequence. Hard money buys and renovates the property. DSCR refinances it once tenants are in place and cash flow is verified.
If you're flipping, hard money is your only option. If you're renting long-term, DSCR wins on cost. Match the loan term to your investment timeline.
No. DSCR loans require the property to be rent-ready or already generating income. Use hard money for properties needing significant repairs.
Most hard money loans mature in 12-24 months. You'll need to sell, refinance, or pay off the balance before the term ends.
Yes. Lenders need an appraisal with a rent schedule to calculate your debt service coverage ratio and confirm property value.
DSCR loans work better for remote investors. No income verification means your location doesn't matter, only the property's cash flow.
Yes. Hard money lenders focus on the deal and your exit strategy, not your credit score. Expect higher rates with credit below 600.