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in San Marcos, CA
San Marcos investors face a key decision when financing property: conventional loans or DSCR loans. Each serves different borrower profiles and investment goals in this North San Diego County market.
Conventional loans require W-2 income verification and strong personal finances. DSCR loans qualify you based solely on the property's rental income potential, making them ideal for investors with complex income or multiple properties.
Understanding these differences helps you choose the right financing for your San Marcos real estate investment.
Conventional loans offer the lowest rates for qualified borrowers with steady W-2 income. You'll need credit scores typically above 620, documented income, and debt-to-income ratios under 50%.
These mortgages work well for owner-occupants and first-time investors. Down payments start at 3% for primary residences, though investment properties require 15-25% down.
Conventional financing provides the most competitive terms when you have traditional employment and strong personal credit. Rates vary by borrower profile and market conditions.
DSCR loans qualify San Marcos investors based on rental income, not personal income. Your property must generate enough rent to cover the mortgage payment, typically with a ratio above 1.0.
These loans skip tax returns and pay stubs entirely. You'll need 20-25% down and credit scores around 660 or higher, but your employment history doesn't matter.
DSCR financing excels for self-employed investors, those with multiple rentals, or buyers whose personal income doesn't reflect their true financial capacity. Rates vary by borrower profile and market conditions.
The fundamental difference is qualification method. Conventional loans examine your personal finances: job history, W-2s, tax returns, and total debt. DSCR loans only care if the San Marcos property generates sufficient rental income.
Interest rates differ significantly. Conventional loans typically offer lower rates for well-qualified borrowers. DSCR loans carry slightly higher rates due to their flexible qualification standards.
Down payment requirements separate them too. Conventional allows as little as 15% down on investment properties with excellent credit. DSCR loans generally require 20-25% down regardless of credit strength.
Conventional loans have stricter debt-to-income limits and maximum loan counts. DSCR loans have no DTI requirements and unlimited property portfolio sizes.
Choose conventional financing if you have stable W-2 income, strong credit, and want the lowest possible rate. It's ideal for first-time San Marcos investors or those buying a few properties.
DSCR loans make sense when you're self-employed, own multiple rentals, or have non-traditional income sources. They're also perfect when the property's rental income is strong but your personal DTI is maxed out.
Consider your long-term strategy. Building a large San Marcos portfolio? DSCR loans scale better since they don't count against your personal debt ratio. Buying one rental with a stable job? Conventional saves you money.
Many investors use both strategically. Conventional loans for early properties when DTI allows, then DSCR loans as the portfolio grows and conventional options become limited.
Yes, DSCR loans don't require tax returns or income verification. They qualify you based solely on the rental property's cash flow, making them ideal for self-employed borrowers.
Conventional loans typically offer lower interest rates for qualified borrowers. DSCR rates run slightly higher due to their flexible qualification. Rates vary by borrower profile and market conditions.
Conventional investment loans require 15-25% down. DSCR loans typically need 20-25% down. Exact requirements depend on credit score and property type.
Yes, but conventional financing limits you to 10 financed properties and counts all mortgages in your debt-to-income ratio. DSCR loans have no such limits.
DSCR loans often close faster since they skip income verification. Conventional loans require more documentation but both typically close within 30-45 days with proper preparation.