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in Half Moon Bay, CA
Half Moon Bay's coastal real estate market attracts both primary homebuyers and investors seeking rental income properties. Choosing between conventional financing and DSCR loans depends on whether you'll occupy the property or rent it out.
Conventional loans serve traditional buyers with steady W-2 income. DSCR loans help investors qualify based on rental income instead of personal earnings. Each option has distinct advantages for different property goals in San Mateo County.
Conventional loans follow Fannie Mae and Freddie Mac guidelines. Lenders verify your employment, income, assets, and credit history. You'll need a minimum credit score of 620, though higher scores unlock better rates.
These mortgages work well for owner-occupied homes in Half Moon Bay's residential neighborhoods. Down payments start at 3% for first-time buyers and 5% for repeat buyers. Investment properties require 15-25% down depending on the number of units.
Rates vary by borrower profile and market conditions. Conventional loans typically offer the lowest rates for borrowers with strong credit and stable employment. You can choose fixed-rate terms from 15 to 30 years.
DSCR loans qualify you based on property income, not personal income. Lenders calculate the debt service coverage ratio by dividing monthly rental income by the monthly mortgage payment. A ratio above 1.0 means the property generates enough rent to cover the loan.
This financing appeals to self-employed borrowers, investors with multiple properties, or anyone who doesn't want to provide tax returns. Half Moon Bay's strong vacation rental market makes DSCR loans attractive for coastal investment properties.
These loans typically require 20-25% down and accept credit scores as low as 640. You won't submit pay stubs or employment letters. Instead, lenders focus on the property's ability to generate rental income through lease agreements or rental comparables.
Qualification methods separate these options most dramatically. Conventional loans require full income documentation including W-2s, pay stubs, and tax returns. DSCR loans skip personal income review entirely and focus on rental cash flow.
Interest rates differ too. Conventional loans offer lower rates for well-qualified borrowers. DSCR loans carry slightly higher rates because they involve more lender risk. Rates vary by borrower profile and market conditions for both products.
Property type matters significantly. Conventional loans work for primary residences, second homes, and investment properties. DSCR loans only finance rental properties where tenants pay the mortgage through monthly rent.
Choose conventional financing if you're buying a primary residence in Half Moon Bay or have traditional W-2 income. These loans deliver the best rates and terms for owner-occupants with clean credit and steady employment.
Pick DSCR financing if you're purchasing a rental property and prefer not to provide tax returns. Self-employed borrowers, retirees, or investors with complex income situations benefit most from DSCR's simplified qualification process.
Consider your long-term plans too. Conventional loans suit buyers building equity in their own home. DSCR loans serve real estate investors growing rental portfolios without personal income limitations holding them back.
Yes, DSCR loans work for vacation rentals. Lenders evaluate expected rental income from comparable properties to determine if cash flow supports the mortgage payment.
Conventional loans typically require higher credit scores. Most lenders want 620 minimum for conventional, while DSCR loans accept scores as low as 640.
Some DSCR loans include prepayment penalties while conventional loans typically don't. Always review loan terms before committing to understand any early payoff restrictions.
You can refinance from DSCR to conventional financing once you qualify under conventional standards. This might lower your rate if your income and credit profile support it.
DSCR loans often close faster because they require less documentation. Without tax returns and employment verification, underwriting moves more quickly than conventional processing.