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in Temecula, CA
Temecula real estate investors have two popular financing options: DSCR loans and hard money loans. Both are non-QM products that don't rely on traditional income verification.
DSCR loans focus on rental income and work for buy-and-hold investors. Hard money loans are asset-based and designed for quick acquisitions and renovations. Your investment strategy determines which loan type makes sense.
Understanding the differences helps you choose the right financing for your Riverside County investment property. Each loan serves different purposes and timelines.
DSCR loans qualify investors based on rental property income rather than personal income. The debt service coverage ratio compares monthly rent to the mortgage payment.
These loans offer longer terms, typically 30 years, with rates that vary by borrower profile and market conditions. They work well for investors building long-term rental portfolios in Temecula.
No tax returns or W-2s are required for approval. The property's cash flow is the primary qualification factor, making DSCR loans ideal for self-employed investors.
Hard money loans are short-term financing based primarily on property value. These loans fund quickly, often within days, making them perfect for competitive Temecula markets.
Terms typically range from 6 to 24 months with rates that vary by borrower profile and market conditions. Investors use them for fix-and-flip projects or bridge financing until permanent financing is secured.
Approval focuses on the property's after-repair value and equity position. Credit and income matter less than the deal itself, allowing investors to move fast on opportunities.
The biggest difference is timeline and purpose. DSCR loans are long-term solutions for rental properties. Hard money loans are short-term tools for acquisitions and rehabs.
Qualification criteria differ significantly. DSCR loans require positive rental cash flow and a good DSCR ratio. Hard money loans focus on property value and equity, with less emphasis on income.
Costs and rates also vary, with rates varying by borrower profile and market conditions. Hard money typically has higher rates but faster closing. DSCR loans offer lower rates but longer processing times.
Choose DSCR loans if you're buying rental properties to hold long-term in Temecula. They work when the property generates enough rent to cover the mortgage payment.
Hard money loans fit investors flipping properties or needing quick funding. If you're renovating and reselling within months, hard money provides the speed you need.
Some investors use both strategically. They might buy with hard money, complete renovations, then refinance into a DSCR loan for long-term rental income in Riverside County.
DSCR loans are designed for rental properties with existing income. For fix-and-flip projects, hard money loans are the better choice due to their short terms and fast funding.
DSCR loans typically have lower rates than hard money loans. Rates vary by borrower profile and market conditions. Hard money costs more but offers speed and flexibility.
DSCR loans usually require credit scores around 620-680. Hard money lenders are more flexible with credit since they focus primarily on the property's value and equity.
Hard money loans can close in days, sometimes within a week. DSCR loans take longer, typically 3-4 weeks, similar to conventional mortgage timelines.
Yes, this is a common strategy. Investors use hard money to acquire and renovate, then refinance to a DSCR loan once the property is rented and cash-flowing.