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in Merced, CA
Merced investors usually choose between DSCR loans and hard money based on their timeline. DSCR works for cash-flowing rentals you plan to hold long-term.
Hard money fits fix-and-flip projects or acquisitions that need fast funding. Both skip W-2 income verification, but they serve completely different investment strategies.
DSCR loans qualify you based on rental income alone. Lenders calculate the property's monthly rent divided by its monthly debt payment — that's your DSCR ratio.
Most lenders want a DSCR of 1.0 or higher, meaning rent covers the mortgage payment. You get 30-year fixed rates, long-term stability, and no need to prove W-2 income or tax returns.
This works well for Merced single-family rentals, small multifamily properties, or Airbnb investments. Terms mirror conventional loans but rates run 1-2% higher.
Hard money loans fund based on the property's after-repair value, not your income or credit. You get approved in days, close in 1-2 weeks, and pay interest-only during the loan term.
Terms last 6-24 months with rates between 8-15%. Lenders focus on your exit strategy — how you'll pay off the loan through a sale, refinance, or permanent financing.
Merced investors use hard money for distressed properties, foreclosure auctions, or deals that need immediate funding. The speed and flexibility come at a premium cost.
DSCR gives you 30 years to repay at 7-9% rates. Hard money gives you 12-18 months at 10-14% rates with 2-5 points upfront.
DSCR requires the property to generate rent that covers the payment. Hard money only cares about the asset value and your renovation plan.
DSCR takes 3-4 weeks to close and needs appraisals, title work, and full underwriting. Hard money closes in 7-14 days with minimal documentation.
You keep a DSCR loan for years. You exit hard money in under two years through a sale or refinance into permanent financing.
Choose DSCR if you're buying a rental property you plan to hold long-term. The lower rates and stable payments make it the right fit for cash-flowing assets in Merced's rental market.
Choose hard money if you're flipping a distressed property, buying at auction, or need funding before conventional financing kicks in. The speed justifies the higher cost on short-term projects.
Many Merced investors use both — hard money to acquire and renovate, then refinance into a DSCR loan once the property's rented and stabilized. This strategy maximizes speed upfront and cost savings long-term.
Yes, this is a common strategy. Once your renovation is done and the property is rented, you refinance into a DSCR loan for long-term, lower-cost financing.
DSCR loans typically require 20-25% down. Hard money lenders want 25-35% down, sometimes higher depending on the project risk.
Yes, both are investor products. DSCR and hard money loans are designed for rental properties, fix-and-flips, and other non-owner occupied real estate.
Hard money wins on speed. You can close in 7-14 days compared to 3-4 weeks for DSCR loans.
Not usually. DSCR lenders want move-in ready or lightly distressed properties that can generate rent immediately. Use hard money for heavy rehabs.