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in South Pasadena, CA
South Pasadena investors face a clear choice: conventional loans for owner-occupants or DSCR loans for pure rental plays. The right option depends on whether you're living in the property or buying strictly for rental income.
Conventional loans dominate primary residence purchases in South Pasadena. DSCR loans serve investors who want rental properties without showing W-2 income. Each has distinct approval criteria and rate structures.
Conventional loans require full income documentation through tax returns and pay stubs. You'll need 620+ credit for approval, 700+ for competitive rates. Down payment starts at 3% for primary homes, 15-20% for investment properties.
These loans cap at $766,550 in Los Angeles County for 2024. Above that, you're in jumbo territory with stricter requirements. Rates beat DSCR options when you qualify, typically 0.5-1% lower.
Conventional underwriting scrutinizes debt-to-income ratios. Lenders want your total debt under 43-50% of gross income. Employment history matters—two years in the same field strengthens approval odds.
DSCR loans ignore your personal income entirely. Approval hinges on one metric: monthly rent divided by monthly mortgage payment. Lenders want 1.0 or higher—rent covers the note.
Expect 20-25% down minimum. Credit requirements sit around 660-680 for most programs. No tax returns, no pay stubs, no employment verification. The property's income is what counts.
Rates run 1-2% above conventional. You're paying for underwriting flexibility. DSCR works for self-employed investors, retirees with rental portfolios, or anyone who doesn't want income scrutiny.
Income verification separates these loans completely. Conventional lenders want two years of tax returns and recent pay stubs. DSCR lenders pull a rent schedule and appraisal—done.
Rate spreads matter in South Pasadena's price range. On a $700,000 purchase, the 1% rate difference costs $350 monthly. Over five years, that's $21,000 in extra interest on DSCR.
Occupancy rules differ sharply. Conventional loans offer best terms for owner-occupied properties. DSCR loans only work for non-owner occupied rentals. Living there disqualifies you from DSCR.
Down payment requirements tilt conventional for primary homes. You can buy with 3% down owner-occupied. DSCR demands 20-25% regardless. That's $140,000+ on typical South Pasadena properties.
Choose conventional if you're buying a primary residence or showing solid W-2 income. The rate savings alone justify the paperwork. South Pasadena's stable home values make conventional loans straightforward.
Pick DSCR when personal income complicates approval or you're expanding a rental portfolio. Self-employed borrowers with write-offs often benefit. So do investors buying multiple properties in one year.
Conventional works better for first-time buyers and move-up buyers. DSCR serves experienced investors who prioritize speed and privacy over rate. Both have a place in South Pasadena's market.
No. DSCR loans require the property to be a rental. If you're living there, you need conventional, FHA, or another owner-occupied program.
DSCR often closes quicker due to simpler documentation. Conventional takes longer with full income verification but offers better rates.
Conventional becomes jumbo with stricter rules. DSCR handles high balances without the jumbo designation since it's already non-QM.
Yes, if you convert to a rental. You'll pay a higher rate but eliminate income documentation requirements going forward.
Conventional typically has no prepayment penalty. DSCR often includes a 1-3 year prepay penalty depending on the lender and rate structure.