Question 1

Can I use DSCR for a property that needs rehab?

Accepted Answer

Minor repairs work, but major rehabs don't. The property must appraise and support rent projections at closing. Gut jobs need hard money first.

Question 2

Which loan type has better prepayment terms?

Accepted Answer

Hard money typically has no prepay penalty since lenders expect 6-12 month holds. DSCR loans often carry 2-3 year prepay penalties or step-downs.

Question 3

Do both loans allow cash-out refinances?

Accepted Answer

DSCR allows cash-out refis after seasoning periods, usually 6-12 months. Hard money doesn't do cash-out—you're exiting to permanent financing or selling.

Question 4

Can I qualify for DSCR with multiple rental properties?

Accepted Answer

Yes. Each property qualifies independently on its own DSCR ratio. No limit on property count, though some lenders cap at 10 financed properties.

Question 5

What down payment do I need for each loan type?

Accepted Answer

DSCR requires 20-25% down on purchases. Hard money lends 65-80% LTV depending on deal structure and exit strategy.

Question 6

How do rate cuts affect these loan types?

Accepted Answer

DSCR rates track conventional mortgages and drop when the Fed cuts. Hard money stays tied to private capital costs and moves less with Fed policy.

DSCR Loans vs Hard Money Loans in Pismo Beach: Which Investor Loan Fits Your Deal?