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in Nevada City, CA
Nevada City's gold rush charm attracts both primary homebuyers and investors eyeing vacation rentals. The loan you need depends entirely on whether you're buying to live in or rent out.
Conventional loans work for owner-occupied properties and require W-2 income verification. DSCR loans ignore your tax returns completely and qualify you based solely on the property's rental income potential.
Conventional loans are Fannie Mae and Freddie Mac products designed for homebuyers with documented income. You need tax returns, pay stubs, and a minimum 620 credit score, though 680+ gets better pricing.
Down payment starts at 3% for first-time buyers, 5% for repeat buyers on primary homes. Investment properties require 15-25% down depending on credit and reserves.
These loans cap at $766,550 in Nevada County for 2024 conforming limits. Above that, you're in jumbo territory with stricter requirements and slightly higher rates.
DSCR loans qualify investors using only the property's rent-to-payment ratio. Lenders calculate whether market rent covers the mortgage, taxes, insurance, and HOA by at least 1.0x to 1.25x.
No tax returns, no W-2s, no explanation of your business income. Your credit score and down payment carry all the weight, with 20-25% down standard and 660+ credit preferred.
These loans work particularly well for Nevada City vacation rentals where Airbnb income exceeds traditional long-term rent. Lenders use market rent analysis or actual lease agreements to calculate debt service coverage.
The approval process splits sharply. Conventional loans underwrite your personal finances: employment history, debt-to-income ratio, tax returns for the past two years. DSCR loans skip all that and order a rent schedule or appraisal with rental income analysis.
Rates vary by borrower profile and market conditions, but DSCR typically runs 0.50-1.00% higher than conventional. That gap narrows when your credit exceeds 740 and you put 25%+ down.
Conventional loans require proof you can afford the payment from your income. DSCR loans require proof the property generates enough rent to cover its own payment. Both verify assets, credit, and property condition.
Choose conventional if you're buying a primary residence or second home in Nevada City. The lower rates and smaller down payment options make this the obvious pick when you have W-2 income and clean tax returns.
Choose DSCR if you're buying investment property and your tax returns show business write-offs that tank your qualifying income. Self-employed borrowers with strong cash flow but low reportable income save months of documentation hassles.
Nevada City's vacation rental market makes DSCR particularly useful. A property generating $3,000/month in short-term rental income might only appraise for $2,200 long-term rent, but many DSCR lenders accept short-term rental analysis on established Airbnb properties.
No. DSCR loans are strictly for investment properties you'll rent out. Owner-occupied purchases require conventional, FHA, or other traditional financing.
Conventional loans typically price 0.50-1.00% lower than DSCR. Rates vary by borrower profile and market conditions, with the gap narrowing at higher credit scores and down payments.
Conventional requires PMI below 20% down on primary residences. DSCR loans skip mortgage insurance entirely but require larger down payments to compensate for higher risk.
Yes. Lenders use market rent analysis from the appraisal to calculate debt service coverage, even on vacant properties or new construction.
DSCR often closes 5-7 days quicker because there's no employment verification or tax return review. Both take 25-35 days on average with all documents ready.