Question 1

Can I use a DSCR loan for a property that needs renovation?

Accepted Answer

DSCR loans require the property to generate rental income immediately. For properties needing significant work, start with hard money financing, complete renovations, then refinance to a DSCR loan once the property is rent-ready.

Question 2

How quickly can I get approved for each loan type?

Accepted Answer

Hard money loans can close in as little as 5-7 days. DSCR loans typically take 3-4 weeks but still close faster than conventional mortgages since they don't require extensive income documentation.

Question 3

What credit score do I need for DSCR versus hard money loans?

Accepted Answer

DSCR loans generally require minimum credit scores of 620-680. Hard money lenders are more flexible with credit since they focus primarily on the property's value and your exit strategy.

Question 4

Are interest rates higher on hard money loans?

Accepted Answer

Yes, hard money loans typically have higher interest rates due to their short-term nature and higher risk. Rates vary by borrower profile and market conditions, but expect to pay a premium for speed and flexibility.

Question 5

Can I convert a hard money loan to a DSCR loan?

Accepted Answer

You can't convert directly, but you can refinance. Once your renovation is complete and the property generates rental income, you can apply for a DSCR loan to pay off the hard money loan.

DSCR Loans vs Hard Money Loans: Choosing the Right Financing for Hillsborough Investment Properties