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in South Pasadena, CA
South Pasadena investors face a choice between two non-QM options when banks say no. DSCR loans use rental income to qualify, while hard money lenders focus purely on the asset.
One is built for buy-and-hold cash flow. The other solves speed and credit problems on fix-and-flip projects. Your timeline and exit strategy determine which path makes sense.
DSCR loans approve based on whether rent covers the mortgage payment. Most lenders want a 1.0 ratio or higher—meaning monthly rent equals or exceeds the full PITI payment.
Rates typically run 1-2% above conventional investor loans. Terms stretch to 30 years, making this a true financing option for South Pasadena rental portfolios, not a bridge product.
You'll need 20-25% down and a 620+ credit score. Lenders pull tax returns only to verify assets, not to calculate debt-to-income ratios like traditional mortgages require.
Hard money lenders fund based on after-repair value and equity position. They don't care about your tax returns, DSCR ratios, or employment history—just the property's upside.
Rates range from 8-12% with 2-4 points upfront. Terms max out at 12-24 months because these loans finance acquisition and renovation, not permanent holding.
Approval happens in days, not weeks. If you're competing on a South Pasadena teardown or need to close before a conventional appraisal clears, hard money keeps deals alive.
Rate spread is the clearest difference. DSCR loans price 1-2% above conventional—maybe 7.5-8.5% today. Hard money starts around 9% and climbs from there.
Timeline splits these products. Hard money closes in a week when you need speed or have credit issues. DSCR loans take 3-4 weeks but cost half as much annually.
Exit strategy determines fit. Hard money assumes you'll refinance or sell within a year. DSCR loans are the refinance—permanent financing you can hold for decades.
Use DSCR loans when you're buying a South Pasadena rental that's already tenant-ready or needs minor cosmetic work. The property has to generate rent immediately to hit that 1.0 coverage ratio.
Hard money fits three scenarios: you're flipping, you're buying at auction with a 10-day close, or your credit is too damaged for DSCR approval. The high cost only makes sense when speed or credit challenges block other paths.
Most investors use both at different stages. Hard money buys and renovates the property. DSCR loans refinance it once tenants are in place and cash flow is proven.
No. DSCR loans require rental income from day one. Flip projects generate zero monthly income, so they can't meet the debt service coverage ratio lenders require.
DSCR loans typically require 620+ credit scores. Hard money lenders often approve borrowers in the 500s if the deal has enough equity and a solid exit plan.
DSCR loans max out around $3-4 million for most portfolios. Hard money lenders cap loans at 65-75% of after-repair value, regardless of property price.
No. Hard money lenders only evaluate the property's value and renovation budget. They don't verify income, employment, or debt-to-income ratios at all.
Yes, and most investors do. Once your rehab is done and you have a signed lease, DSCR lenders will refinance your hard money loan into permanent financing.