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in Millbrae, CA
Millbrae investors and homebuyers face a key choice: conventional financing or DSCR loans. Each path serves different needs in San Mateo County's competitive market.
Conventional loans offer traditional qualifying based on your income and credit. DSCR loans focus solely on the property's rental income potential.
Understanding these differences helps you match the right loan to your property strategy. Your choice affects rates, down payments, and approval odds.
Conventional loans represent the standard path for most homebuyers and investors. Lenders evaluate your personal income, employment history, credit score, and debt-to-income ratio.
These mortgages aren't backed by government agencies, giving lenders flexibility in terms. You'll typically need a credit score of 620 or higher, with better rates above 740.
Down payments start at 3% for primary residences. Investment properties require at least 15-20% down. Private mortgage insurance applies when you put down less than 20%.
Conventional loans work best when you have strong personal finances and stable income. They offer competitive rates and established underwriting standards most lenders follow.
DSCR loans flip the qualification script for real estate investors. Lenders approve you based on the property's rental income, not your W-2 or tax returns.
The debt service coverage ratio compares monthly rent to the mortgage payment. A ratio of 1.0 means rent equals the payment. Most lenders prefer 1.25 or higher for the best terms.
These non-QM loans require larger down payments, typically 20-25%. You won't need to verify personal income or show employment history during underwriting.
DSCR financing serves self-employed investors, those with complex tax returns, or buyers building rental portfolios. Rates run higher than conventional but offer unique flexibility.
The qualifying process separates these loans most dramatically. Conventional underwriting scrutinizes your personal finances top to bottom. DSCR lenders care only about the property's cash flow potential.
Down payment requirements differ significantly. Conventional allows 3% down on primary homes but demands 15-20% for investment properties. DSCR loans typically start at 20-25% regardless of property use.
Interest rates vary by borrower profile and market conditions. Conventional loans generally offer lower rates for qualified borrowers. DSCR rates run higher to offset the alternative qualification method.
Documentation needs contrast sharply. Conventional requires pay stubs, tax returns, and employment verification. DSCR loans skip personal income docs entirely, focusing on lease agreements and rent rolls instead.
Choose conventional loans when buying a primary residence or when your personal finances are strong. W-2 employees with steady income and good credit get the best conventional terms.
DSCR loans make sense for self-employed investors or those with non-traditional income. If you're building a rental portfolio in Millbrae, qualifying on property income removes personal income limitations.
Consider your long-term strategy. Planning to buy multiple investment properties? DSCR loans won't count against your debt-to-income ratio since they don't use personal income for qualifying.
Mix both loan types strategically. Use conventional for your primary home and first rental. Switch to DSCR as you scale your San Mateo County investment portfolio.
DSCR loans are designed exclusively for investment properties that generate rental income. You'll need a conventional loan for a primary residence purchase.
Rates vary by borrower profile and market conditions. Conventional loans typically offer lower rates for qualified borrowers compared to DSCR financing.
DSCR loans don't require personal tax returns or income verification. Lenders focus on the property's rental income and your credit score instead.
Conventional loans typically require 620 minimum, with better rates above 740. DSCR loans usually need 660-680 minimum for approval.
You can refinance from conventional to DSCR when the property becomes a rental. The reverse works too if you meet conventional qualifying standards.