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in Los Altos Hills, CA
Los Altos Hills investors have two powerful non-QM financing options. DSCR loans qualify you based on rental income, while hard money loans fund deals based on property value.
Both serve different investment strategies. DSCR loans work for buy-and-hold rentals with longer terms. Hard money loans excel at quick acquisitions and fix-and-flip projects.
Understanding these differences helps you match financing to your investment goals. The right choice depends on your timeline, property condition, and exit strategy.
DSCR loans use rental income to qualify borrowers. Your debt service coverage ratio compares monthly rent to mortgage payments. A ratio above 1.0 means rent covers the loan.
These loans offer terms up to 30 years with fixed or adjustable rates. You avoid traditional income documentation like tax returns and pay stubs. Property cash flow drives approval decisions.
Rates vary by borrower profile and market conditions. DSCR loans typically require 20-25% down and credit scores above 620. They work best for stabilized rental properties generating consistent income.
Hard money loans fund quickly based on property value and exit strategy. Lenders focus on the asset, not your personal finances. These short-term loans typically last 6-24 months.
Approval happens in days, not weeks. You can close in as little as 7-10 days on strong deals. Hard money works for distressed properties that traditional lenders reject.
Rates vary by borrower profile and market conditions, but expect higher costs than conventional loans. Points and fees are standard. Down payments range from 10-30% depending on experience and deal quality.
Timeline separates these options dramatically. DSCR loans take 3-4 weeks to close with lower rates. Hard money closes in 7-10 days but costs more upfront and monthly.
Property condition matters differently. DSCR lenders want rent-ready properties with tenants or tenant potential. Hard money lenders fund properties needing significant work.
Your investment strategy determines the fit. Flippers and rehabbers choose hard money for speed and flexibility. Buy-and-hold investors prefer DSCR loans for lower long-term costs.
Exit strategies differ completely. DSCR loans are your end financing for rental properties. Hard money is bridge financing until you refinance or sell.
Choose DSCR loans when buying rental properties you plan to hold. They make sense for stabilized assets generating rental income. Lower rates and longer terms reduce monthly expenses.
Pick hard money for acquisitions requiring speed or properties needing renovation. Use it when traditional financing won't work. Plan your refinance or sale exit before closing.
Many Los Altos Hills investors use both strategically. Hard money funds the purchase and renovation. DSCR loans refinance the property once stabilized and rented. This combination maximizes flexibility and minimizes long-term costs.
DSCR loans require rental income for qualification, making them unsuitable for flips. They work for properties you plan to rent. Hard money is the better choice for fix-and-flip projects.
DSCR loans typically offer lower rates than hard money loans. Rates vary by borrower profile and market conditions. Hard money prioritizes speed over cost, resulting in higher rates and fees.
Neither requires traditional income documentation. DSCR loans qualify on rental income. Hard money loans focus on property value and your exit strategy rather than personal finances.
DSCR loans typically require 20-25% down. Hard money ranges from 10-30% depending on deal quality and borrower experience. Stronger deals and experienced investors get better terms.
Yes, this is a common strategy. Use hard money to acquire and renovate. Once stabilized with tenants, refinance into a DSCR loan. This approach combines speed with long-term affordability.