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in Foster City, CA
Foster City investors have two powerful financing options when traditional mortgages don't fit their strategy. DSCR loans and hard money loans serve different purposes in real estate investing, and understanding each helps you choose the right tool for your goals.
Both options skip traditional income verification, making them attractive for portfolio investors and those pursuing fix-and-flip projects. However, the timeline, costs, and ideal use cases differ significantly between these two financing methods.
DSCR loans qualify you based on rental income the property generates, not your W-2 or tax returns. Lenders calculate the debt service coverage ratio by dividing the property's monthly rental income by the monthly mortgage payment, typically requiring a ratio of 1.0 or higher.
These loans function like traditional mortgages with 30-year terms and competitive rates for investment properties. You'll need at least 20% down, and the property must be investor-owned—no owner-occupied homes qualify for DSCR financing.
DSCR loans work best for buy-and-hold investors building rental portfolios in Foster City's stable housing market. The longer closing timeline and lower rates make them ideal when you plan to keep the property and generate steady rental income.
Hard money loans are short-term financing backed by the property's value rather than your income or credit score. These loans close quickly—often within days—making them essential for competitive situations or properties needing immediate renovation.
Terms typically run 6 to 24 months with higher interest rates reflecting the speed and flexibility. Lenders focus on the property's after-repair value and your exit strategy, whether that's selling the renovated property or refinancing into permanent financing.
Foster City investors use hard money for fix-and-flip projects, bridge financing, or situations requiring rapid closings. The higher costs are offset by speed and the ability to fund renovations, making them powerful tools for experienced investors with clear exit plans.
Timeline separates these options most dramatically. DSCR loans take 30-45 days to close, while hard money can fund in under a week. Cost structure differs too—DSCR loans carry rates typically 1-2% above conventional mortgages, while hard money rates can reach 9-12% plus points.
Repayment terms favor different strategies. DSCR loans amortize over 30 years like traditional mortgages, building equity slowly. Hard money requires either a lump-sum payoff or refinancing within the short term, creating urgency around your exit strategy.
Down payment requirements vary by loan type. DSCR loans need 20-25% down based on your experience and the property's cash flow. Hard money lenders may require 10-30% down depending on the deal structure and your track record with similar projects.
Choose DSCR financing when acquiring rental properties you plan to hold long-term in Foster City. The lower rates and stable monthly payments make sense when rental income covers the mortgage and you're building wealth through appreciation and cash flow over years.
Select hard money when speed matters or the property needs renovation before it can qualify for traditional financing. Fix-and-flip investors, those facing foreclosure timelines, or buyers in multiple-offer situations benefit from hard money's rapid deployment and renovation funding capabilities.
Many successful investors use both strategically—hard money to acquire and renovate, then refinance into DSCR loans for long-term holds. This combination lets you move quickly on opportunities while securing favorable long-term financing once the property stabilizes.
DSCR loans require the property to be rental-ready at purchase. For properties needing renovation, start with hard money, complete the work, then refinance into a DSCR loan if you decide to hold it as a rental.
DSCR loans typically have lower closing costs similar to traditional mortgages. Hard money loans often include points (1-5% of loan amount) plus higher fees, but the speed and flexibility justify the cost for the right deals.
DSCR lenders typically require 620-680 minimum credit scores. Hard money lenders focus more on the deal than your credit, sometimes approving borrowers with scores below 600 if the property value and exit strategy are strong.
Yes, but it's expensive for that purpose. Hard money works as bridge financing until you can refinance into a DSCR loan. Using hard money for long-term holds without refinancing erodes profits due to high interest rates.
DSCR loans generally suit newer investors better due to lower rates and longer terms. Hard money requires strong exit strategy planning and carries higher risk. Build experience with DSCR rentals before tackling hard money flips.