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in Laguna Beach, CA
Laguna Beach investors have two popular financing options for investment properties. DSCR loans and hard money loans each serve different purposes and timelines.
Both are non-QM loans that don't require traditional income verification. Understanding the differences helps you choose the right tool for your investment strategy.
DSCR loans qualify investors based on rental property income rather than personal income. The debt service coverage ratio measures whether rent covers the mortgage payment.
These loans work well for long-term rental property financing. Investors with strong rental income but complex tax returns often prefer this option.
Terms typically mirror traditional mortgages with longer repayment periods. Rates vary by borrower profile and market conditions.
Hard money loans are short-term, asset-based financing for real estate investors. These loans focus on the property's value rather than borrower income or credit.
Investors use them primarily for property acquisition and renovation projects. The quick approval process makes them ideal for competitive Laguna Beach markets.
Terms are typically 6-24 months with higher interest rates. Rates vary by borrower profile and market conditions, but expect premium pricing for speed and flexibility.
The main difference is timeline and purpose. DSCR loans serve long-term buy-and-hold investors, while hard money suits short-term projects.
DSCR loans require properties to generate rental income that covers debt service. Hard money lenders focus on property value and exit strategy instead.
Interest rates and terms differ significantly between these products. Hard money offers speed with higher costs, while DSCR provides stability with lower rates.
Choose DSCR loans if you're buying rental properties to hold long-term. This works well for stable Laguna Beach rental markets with strong cash flow.
Hard money makes sense for fix-and-flip projects or quick acquisitions. If you need fast funding or plan to refinance soon, hard money bridges the gap.
Some investors use both strategically. Start with hard money for purchase and renovation, then refinance into a DSCR loan for long-term holding.
Hard money loans typically close in 7-14 days. DSCR loans take 3-4 weeks, similar to traditional mortgages but without personal income verification.
No, both DSCR and hard money loans are designed for investment properties only. They are not available for primary or secondary homes.
DSCR loans typically have lower rates since they're long-term products. Hard money costs more due to short terms and higher risk. Rates vary by borrower profile and market conditions.
Credit requirements are more flexible than traditional loans. DSCR typically requires 620+ credit score, while hard money may accept lower scores with more equity.
Yes, this is a common strategy. Investors use hard money for purchase and rehab, then refinance to a DSCR loan once the property generates rental income.