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in Redwood City, CA
Redwood City investors have two powerful financing options when traditional mortgages don't fit. DSCR loans qualify you based on rental income, while hard money loans focus on the property's value and your exit strategy.
Both serve real estate investors in San Mateo County, but they work best in different situations. Understanding when to use each can save you thousands and speed up your investment timeline.
DSCR loans qualify you based on whether the property's rental income covers the mortgage payment. If the rent exceeds your monthly payment by enough margin, you can qualify without showing W-2s or tax returns.
These loans typically offer longer terms of 30 years with rates similar to conventional mortgages plus a premium. They work best for buy-and-hold investors building rental portfolios in Redwood City's competitive market.
You'll need a DSCR of at least 1.0, though many lenders prefer 1.25 or higher. Down payments usually start at 20-25% for investment properties.
Hard money loans prioritize the property's value and your equity position over credit scores or income. Lenders focus on the after-repair value and your track record as an investor.
These loans close fast—often in 7-14 days—making them ideal for competitive Redwood City purchases or fix-and-flip projects. Terms typically run 6-24 months with higher interest rates reflecting the short-term nature.
Expect rates that vary by borrower profile and market conditions, but generally higher than DSCR loans. Points and fees are also higher, but speed and flexibility often justify the cost.
Timeline differs dramatically between these options. DSCR loans take 30-45 days to close like traditional mortgages, while hard money can close in under two weeks when you need to act quickly.
Cost structure separates them clearly. DSCR loans offer lower rates for longer terms, making monthly payments manageable for rental properties. Hard money charges higher rates and points but gets you into deals that require speed.
Your exit strategy determines which fits better. Planning to rent long-term? DSCR loans provide stable financing. Flipping or renovating before refinancing? Hard money gives you the quick capital to execute.
Choose DSCR loans when you're purchasing a rental property you plan to hold for years. If the numbers work and you can wait a month for closing, you'll enjoy lower rates and predictable monthly payments.
Pick hard money when speed matters more than cost—competitive bids, foreclosure auctions, or properties needing immediate renovation. These loans excel when you have a clear exit strategy and timeline.
Many Redwood City investors use both strategically. Start with hard money to acquire and renovate quickly, then refinance into a DSCR loan once the property is rent-ready and cash-flowing.
DSCR loans aren't ideal for flips since they require rental income to qualify. Hard money loans work better for renovation projects you plan to sell quickly.
Hard money typically closes in 7-14 days versus 30-45 days for DSCR loans. This speed advantage can help you win competitive deals in San Mateo County.
DSCR loans cost less over time with lower rates and longer terms. Hard money has higher rates and fees but provides speed when timing is critical.
Yes, both typically require 20-25% down or more. Hard money lenders may lend based on after-repair value, effectively reducing your cash requirement.
Absolutely. Many investors use hard money for acquisition and renovation, then refinance to a DSCR loan once the property generates rental income.