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in San Mateo, CA
San Mateo investors face a choice between traditional conventional financing and income-based DSCR loans. Each option serves different buyer profiles and property strategies in this competitive Peninsula market.
Conventional loans rely on your personal income and employment history. DSCR loans qualify you based solely on the rental property's cash flow, making them popular with real estate investors who own multiple properties or have complex tax returns.
Conventional loans offer the most competitive rates for San Mateo buyers with steady W-2 income and strong credit. They require full income documentation, tax returns, and typically a 620+ credit score for approval.
These mortgages work well for owner-occupied purchases or investors buying their first rental property. Down payments start at 3% for primary residences and 15-25% for investment properties.
Lenders evaluate your debt-to-income ratio, employment stability, and credit history. You'll need to show that your monthly obligations stay below 43-50% of your gross income, including the new mortgage payment.
DSCR loans approve San Mateo investors based on rental income instead of personal earnings. Lenders calculate the property's monthly rent against its mortgage payment, taxes, insurance, and HOA fees.
A DSCR ratio of 1.0 or higher means the rent covers all property expenses. Many lenders prefer ratios of 1.25, showing the property generates 25% more income than its costs. Your tax returns and pay stubs don't factor into approval.
These non-QM loans require 20-25% down and accept credit scores as low as 660. They're ideal for self-employed investors, those with multiple properties, or buyers who write off significant business expenses that lower their taxable income.
The qualification process separates these two options dramatically. Conventional loans examine your entire financial profile, while DSCR loans focus exclusively on the subject property's rental income potential.
Interest rates differ by loan type. Conventional mortgages typically offer lower rates because they meet strict government guidelines. DSCR loans carry slightly higher rates as non-QM products, often 0.5-2% above conventional rates depending on your scenario.
Documentation requirements also vary significantly. Conventional loans need two years of tax returns, W-2s, pay stubs, and bank statements. DSCR loans skip personal income docs entirely, requiring only a lease agreement or rental appraisal to verify income potential.
Choose conventional financing if you have W-2 income, clean tax returns, and qualify comfortably under debt-to-income limits. You'll access the lowest rates San Mateo lenders offer and benefit from flexible down payment options.
DSCR loans make sense when your personal income doesn't tell the full story. They work well for investors who own multiple rentals, business owners with heavy write-offs, or buyers purchasing properties with strong rental yields that justify higher rates.
Consider your long-term strategy too. Building a rental portfolio? DSCR loans let you scale without hitting personal income limits. Buying one investment property while working full-time? Conventional financing probably costs less overall.
No, DSCR loans only finance investment properties that generate rental income. They cannot be used for primary residences or second homes because they qualify based on tenant rent payments.
DSCR loans often close quicker because they require less documentation. Without income verification, underwriting moves faster, though both typically close within 30-45 days with experienced lenders.
No personal rental history is required. Lenders evaluate the subject property's rental income using market appraisals or existing lease agreements, not your experience as a landlord.
Yes, you can refinance between loan types. Investors often start with conventional financing, then switch to DSCR loans as their portfolio grows and personal income becomes harder to document.
Conventional loans rarely have prepayment penalties. DSCR loans may include prepayment penalties for 1-5 years depending on the lender, so review terms carefully before closing.