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in South San Francisco, CA
South San Francisco investors face a choice between two popular non-QM loan types. DSCR loans qualify you based on rental income, while hard money loans focus on the property's value.
Both options skip traditional income verification. Your choice depends on whether you need long-term rental financing or short-term project funding.
Understanding these differences helps you match the right loan to your investment strategy in San Mateo County's competitive market.
DSCR loans qualify you based on your property's rental income divided by its monthly debt. A ratio above 1.0 means the rent covers the mortgage payment.
These loans typically run 15 to 30 years with fixed or adjustable rates. Rates vary by borrower profile and market conditions, but you get traditional loan terms.
You can purchase or refinance rental properties without showing tax returns or pay stubs. The property's income determines your eligibility, not your W-2.
Hard money loans focus on your property's current or future value. Lenders approve loans quickly, often within days instead of weeks.
These short-term loans typically last 6 to 24 months. You use them to acquire properties, fund renovations, or bridge to permanent financing.
Interest rates run higher than conventional loans because of the speed and flexibility. Most investors refinance into long-term financing once their project completes.
Loan term separates these options most clearly. DSCR loans span decades while hard money loans last months. This reflects their different purposes.
DSCR loans require the property to generate rental income that covers the payment. Hard money loans only care about equity and exit strategy.
Costs differ significantly. Hard money charges higher rates and points upfront. DSCR loans have lower rates but stricter qualifying criteria around cash flow.
Choose DSCR loans when buying or refinancing a property you plan to rent long-term. The property must already generate income or be immediately rentable.
Pick hard money when you need quick funding for a flip, major renovation, or short-term hold. You should have a clear exit plan to permanent financing or sale.
South San Francisco investors often use hard money first, then refinance into DSCR loans. This strategy works well for properties needing updates before renting.
Your timeline determines your best option. Long-term rentals suit DSCR financing. Quick acquisition and turnaround projects need hard money speed.
DSCR loans require the property to generate rental income for qualification. You would need hard money to fund renovations first, then refinance to a DSCR loan once the property rents.
Hard money loans typically close in 5 to 10 days. DSCR loans take 21 to 45 days because they require rental analysis and more documentation despite skipping personal income verification.
Yes, though requirements vary. DSCR loans often require 20-25% down and sufficient rental income. Hard money focuses on the deal itself and may work better for newer investors with renovation experience.
You must refinance, extend the loan, or sell the property. Plan your exit before closing. Most investors refinance to DSCR or conventional loans or sell the completed project.
You refinance from one to the other rather than convert. Once your property is renovated and rented, you can apply for DSCR financing to replace the hard money loan with long-term financing.