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in San Juan Capistrano, CA
San Juan Capistrano investors have two powerful financing options for rental properties and fix-and-flip projects. DSCR loans and hard money loans serve different purposes in your investment strategy.
Both are non-QM loans that don't require W-2 income verification. Understanding the key differences helps you choose the right financing for your specific property goals.
The best choice depends on your timeline, exit strategy, and whether you're buying a rental or renovating for resale. Let's compare these two popular investor loan types.
DSCR loans qualify investors based on a rental property's income rather than personal income. The property must generate enough rent to cover the mortgage payment and related expenses.
These loans work well for long-term rental investors in San Juan Capistrano. You can secure 30-year fixed-rate financing without showing tax returns or pay stubs.
Lenders calculate the debt service coverage ratio by dividing rental income by total debt obligations. A ratio above 1.0 means the property generates positive cash flow.
Hard money loans are asset-based short-term loans primarily used for property acquisition and renovation projects. Lenders focus on the property's value rather than borrower credit or income.
These loans typically last 6 to 24 months with interest-only payments. San Juan Capistrano investors use them for fix-and-flip projects or bridge financing.
Approval happens quickly, often within days. This speed makes hard money ideal when you need to close fast on a distressed property or competitive deal.
The timeline separates these two loan types most clearly. DSCR loans offer long-term financing up to 30 years, while hard money loans last 6 to 24 months.
Qualification methods differ significantly. DSCR lenders evaluate rental income potential, while hard money lenders focus on property value and equity position.
Rates vary by borrower profile and market conditions. Hard money loans typically carry higher rates due to their short-term nature and faster approval process. DSCR loans offer more competitive rates for longer holds.
Choose DSCR loans when buying rental properties you plan to hold long-term in San Juan Capistrano. These loans make sense for cash-flowing properties with stable tenant demand.
Hard money loans work best for fix-and-flip projects or when you need quick financing. Use them when speed matters more than rate, or when renovating before refinancing.
Some investors use both strategically. Buy and renovate with hard money, then refinance into a DSCR loan once the property is rent-ready. This approach maximizes flexibility.
Yes, many investors start with hard money for purchase and renovation, then refinance into a DSCR loan for long-term rental income. This strategy provides quick closing and permanent financing.
DSCR loans typically require higher credit scores, usually 620 or above. Hard money lenders focus more on property value and may accept lower credit scores.
Hard money loans can close in 5-10 days. DSCR loans typically take 3-4 weeks, similar to conventional mortgages but faster than many bank portfolio loans.
Yes, both are designed specifically for investment properties. Neither requires you to live in the San Juan Capistrano property you're financing.
DSCR loans typically offer lower rates due to longer terms and lower risk. Hard money rates are higher but you only pay for the short time you need the loan.