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in San Francisco, CA
San Francisco real estate investors have two powerful financing options: DSCR loans and hard money loans. Both are non-qualified mortgage products designed for investment properties.
DSCR loans qualify you based on rental income, not personal income. Hard money loans focus on property value and fund quickly for acquisitions and renovations.
Choosing the right loan depends on your timeline, project type, and investment goals. Understanding the differences helps you make the best financial decision.
DSCR loans qualify investors based on a rental property's income rather than personal income. The debt service coverage ratio compares monthly rent to monthly mortgage payment.
These loans work well for buy-and-hold investors with cash-flowing properties. Terms typically extend 15 to 30 years with competitive interest rates.
You don't need traditional income documentation like W-2s or tax returns. The property's ability to generate rent is what matters most.
Hard money loans are asset-based short-term loans primarily used for property acquisition and renovation projects. Lenders focus on the property's current and future value.
Funding happens quickly, often within days or weeks. Terms usually run 6 to 24 months with higher interest rates than conventional loans.
These loans excel for fix-and-flip projects, time-sensitive purchases, or properties needing significant repairs. The property itself serves as primary collateral.
The biggest difference is timeline and purpose. DSCR loans offer long-term financing for stabilized rentals, while hard money provides short-term capital for acquisitions and renovations.
Interest rates and costs vary significantly. Hard money loans typically carry higher rates but close faster. DSCR loans have lower rates but longer processing times.
Qualification criteria differ too. DSCR lenders analyze rental income and property cash flow. Hard money lenders emphasize property value, equity position, and exit strategy.
Rates vary by borrower profile and market conditions. Your credit score, down payment, and experience level all influence your final terms.
Choose DSCR loans if you're buying a rental property to hold long-term. They work best when the property already generates income or will shortly after purchase.
Select hard money loans for fix-and-flip projects or urgent acquisitions. They're ideal when speed matters more than interest rate, or when properties need major repairs.
Many San Francisco investors use both strategically. Start with hard money to acquire and renovate, then refinance into a DSCR loan for long-term rental income.
Consider your exit strategy, timeline, and property condition. A mortgage broker can help you analyze which option maximizes your returns.
DSCR loans work best for stabilized properties generating rental income. For major renovations, hard money is usually better, then refinance to DSCR after repairs.
DSCR loans typically offer lower rates due to longer terms. Hard money rates are higher but offset by speed and flexibility. Rates vary by borrower profile and market conditions.
Hard money loans often close in 7-14 days. DSCR loans usually take 30-45 days. Timeline depends on property complexity and documentation readiness.
Both consider credit, but differently. DSCR loans typically require 620+ credit scores. Hard money lenders are more flexible with credit if equity is strong.
DSCR loans generally require 20-25% down. Hard money loans often need 25-35% down depending on property value and borrower experience level.