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in Loma Linda, CA
Loma Linda real estate investors have two popular financing options: DSCR loans and hard money loans. Both are non-QM products designed for investment properties, not traditional home purchases.
DSCR loans use rental income to qualify borrowers for long-term financing. Hard money loans focus on property value for short-term projects. Understanding the differences helps you choose the right tool for your investment strategy.
Your choice depends on your timeline, project type, and financial goals. Rates vary by borrower profile and market conditions for both loan types.
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. A ratio above 1.0 means the property generates enough rent to cover the loan.
These loans typically offer longer terms, often 30 years. They work well for buy-and-hold investors seeking stable, long-term financing. You can skip tax returns and W-2s during the qualification process.
Rates vary by borrower profile and market conditions. DSCR loans generally have lower rates than hard money because they're longer-term products. They're ideal for properties already generating rental income in Loma Linda.
Hard money loans are short-term, asset-based financing primarily used for fix-and-flip projects. Lenders focus on the property's current and after-repair value rather than your income. These loans close quickly, often within days.
Terms typically range from 6 to 24 months. Investors use them to acquire properties needing renovation in San Bernardino County. The speed and flexibility make them popular for competitive markets and time-sensitive deals.
Rates vary by borrower profile and market conditions. Hard money loans carry higher rates due to their short-term nature and higher risk. They're designed for investors who plan to sell or refinance quickly after completing renovations.
The main difference is loan purpose and timeline. DSCR loans serve long-term rental investors, while hard money suits short-term flippers. DSCR underwriting examines rental income; hard money evaluates property value and renovation potential.
Interest rates and costs differ significantly. Hard money loans typically have higher rates and fees due to increased risk and shorter terms. DSCR loans offer more affordable long-term financing for stabilized properties.
Qualification requirements vary too. DSCR loans need properties with existing or projected rental income. Hard money loans require sufficient equity or down payment, usually 20-30% of purchase price.
Choose DSCR loans if you're buying rental properties to hold long-term in Loma Linda. They work best when properties already have tenants or strong rental potential. The lower rates and longer terms provide stability for your investment portfolio.
Pick hard money loans for fix-and-flip projects or properties needing significant work. If you need to close quickly or the property isn't rent-ready, hard money provides fast capital. Plan your exit strategy before taking this loan.
Some investors use both strategically. They might use hard money for acquisition and renovation, then refinance into a DSCR loan. This approach combines speed with long-term affordability for San Bernardino County investments.
DSCR loans aren't ideal for flips because they're designed for rental income properties. Hard money loans better suit short-term renovation projects with quick resale plans.
DSCR loans typically have lower rates than hard money loans. Rates vary by borrower profile and market conditions. Hard money's higher rates reflect shorter terms and greater risk.
Hard money loans close fastest, often within days. DSCR loans take longer, typically 2-4 weeks. The tradeoff is speed versus lower long-term costs.
Both consider credit but emphasize different factors. DSCR focuses on rental income and credit. Hard money prioritizes property value and equity over credit score.
Yes, many investors refinance hard money loans into DSCR loans after renovations. This strategy combines quick acquisition with long-term affordable financing for rentals.