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in Hillsborough, CA
Hillsborough investors face a choice between conventional loans and DSCR financing. Each serves a different purpose.
Conventional loans reward strong W-2 income with lower rates. DSCR loans qualify you based on rental income, ignoring your tax returns entirely.
Most Hillsborough buyers use conventional financing for primary homes. Real estate investors switching to DSCR often do so after their fourth rental property, when conventional lending maxes out.
Conventional loans deliver the lowest rates available. You need a 620 credit score minimum, with better pricing above 740.
Lenders verify income through tax returns and pay stubs. Debt-to-income ratio caps at 45% for most borrowers, sometimes stretching to 50% with strong reserves.
Down payments start at 3% for owner-occupied homes. Investment properties require 15% down for single-unit rentals, 25% for multi-family.
Hillsborough's high property values mean conventional loans hit Fannie Mae limits quickly. The 2026 conforming limit is $832,750 for single-family homes in San Mateo County.
DSCR loans ignore your personal income completely. Approval depends on one number: monthly rent divided by monthly debt service.
You need a DSCR of 1.0 or higher. That means rent covers the full mortgage payment. Many lenders price better at 1.25, where rent exceeds the payment by 25%.
Credit requirements match conventional loans at 620 minimum. Down payments start at 20% for investment properties, sometimes 25% depending on credit and DSCR.
No loan limits exist on DSCR programs. This matters in Hillsborough, where median single-family homes often exceed $3 million. Rates vary by borrower profile and market conditions.
Rate spread typically runs 0.75-1.25% higher on DSCR loans. You pay for the flexibility of skipping income documentation.
Conventional loans let you finance multiple properties. Fannie Mae allows 10 financed properties per borrower. DSCR loans have no property count limits.
Tax return treatment creates the biggest split. Conventional lenders add back depreciation but scrutinize losses. DSCR lenders never see your returns.
The Federal Reserve signaled additional rate cuts later in 2026, which could narrow the gap between conventional and DSCR pricing by summer. Both programs should benefit, but conventional loans typically adjust faster.
Use conventional financing for owner-occupied Hillsborough homes. Rates are lower, and down payment requirements are lighter.
DSCR makes sense when you own multiple rentals or show losses on tax returns. The income-free approval process matters more than rate savings once you hit property four or five.
Many Hillsborough investors switch to DSCR after exhausting conventional options. The DSCR calculation works well here because strong rents support high loan amounts.
Consider DSCR if you're self-employed with complex returns or hold significant assets in non-traditional forms. Some lenders now accept cryptocurrency holdings as reserves in non-QM programs like DSCR.
No. DSCR loans only finance investment properties. You need conventional or another owner-occupied program for primary homes.
Most lenders require 1.0 minimum, meaning rent covers the payment. Ratios of 1.25 or higher unlock better rates.
Yes. DSCR programs have no loan limits, making them ideal for high-value rentals. Conventional loans cap at $832,750 in San Mateo County.
DSCR loans often close quicker. No income verification means less documentation and fewer underwriting delays.
Yes. Many investors refinance rental properties into DSCR loans to free up conventional capacity for new purchases.