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in South Pasadena, CA
Both bank statement and DSCR loans skip traditional income verification. They serve completely different borrowers.
Bank statement loans work for self-employed borrowers buying a primary residence. DSCR loans work for investors who want rental property cash flow to qualify them.
South Pasadena's mix of Craftsman homes and rental properties creates demand for both programs. Most borrowers need one or the other, rarely both.
Bank statement loans use 12 or 24 months of business or personal bank statements to calculate income. Lenders average deposits and apply an expense ratio to determine qualifying income.
You need 10-20% down depending on credit score and property type. Rates run 1-2% higher than conventional loans.
This program works for business owners, freelancers, and 1099 contractors who write off substantial expenses. It only works for primary residences or second homes, not investment properties.
DSCR loans qualify you based on rental income the property generates, not your W-2 or tax returns. The lender divides monthly rent by the mortgage payment to calculate the debt service coverage ratio.
Most lenders want a DSCR of 1.0 or higher, meaning rent covers the full payment. You need 20-25% down for most deals.
This program only works for investment properties. You cannot live in the property or use it as a second home.
Bank statement loans look at your income. DSCR loans look at the property's income. That's the fundamental split.
Bank statement programs require you to live in the property. DSCR programs prohibit you from living in it. You cannot use a DSCR loan for a primary residence.
Down payment requirements overlap at 20-25%, but bank statement loans sometimes allow 10% down for strong borrowers. DSCR loans rarely go below 20%.
Rate pricing is similar, both running 1-2% above conventional. DSCR loans often have slightly better rates because the rental income calculation is simpler than analyzing bank statements.
Pick bank statement loans if you're self-employed and buying a home to live in. Pick DSCR if you're buying rental property and want the property to carry itself.
South Pasadena buyers using bank statement loans are typically business owners purchasing Craftsman homes or family residences. DSCR borrowers are investors targeting rental properties near Metro Gold Line stops.
You cannot choose DSCR for owner-occupied properties, even if the numbers work. Lenders catch this in underwriting and decline the file. The property use determines which program you can access.
No. DSCR loans only work for investment properties. If you plan to live in the property, you need a bank statement loan or another program.
DSCR loans often price slightly better because the rental income calculation is simpler. Both run 1-2% above conventional rates.
DSCR loans typically need 20-25% down. Bank statement loans sometimes allow 10% down for strong credit borrowers on primary residences.
Not through a bank statement loan program. For rental properties, you need a DSCR loan or another investor-focused product.
Both typically require 620-640 minimum. Higher scores unlock better rates and lower down payment options on bank statement loans.