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in Los Gatos, CA
Los Gatos investors and self-employed professionals often need financing options beyond conventional loans. Bank Statement and DSCR loans both serve non-traditional borrowers, but they solve different problems.
Bank Statement loans help self-employed borrowers buy homes they'll live in or rent out. DSCR loans focus exclusively on rental property cash flow. Understanding which one matches your situation saves time and gets you the right financing.
Bank Statement loans verify income using 12 to 24 months of personal or business bank deposits. Lenders calculate your qualifying income from average monthly deposits, which helps self-employed borrowers who write off significant expenses.
You can use these loans for primary residences, second homes, or investment properties in Los Gatos. Many entrepreneurs, freelancers, and small business owners prefer this option because their tax returns show lower income than they actually earn.
Rates vary by borrower profile and market conditions. Most programs require 10-20% down payment and credit scores starting around 620, though stronger profiles get better terms.
DSCR loans qualify you based solely on the rental property's income potential, not your personal income or tax returns. Lenders divide the monthly rent by the monthly mortgage payment to calculate the Debt Service Coverage Ratio.
These loans work exclusively for investment properties in Los Gatos. Your personal income, employment status, and debt-to-income ratio don't matter. The property must generate enough rent to cover its own mortgage payment.
Most DSCR programs require 20-25% down payment. A DSCR of 1.0 or higher means rent covers the mortgage. Some lenders accept ratios below 1.0 with larger down payments and higher rates.
The fundamental difference is what income counts for qualification. Bank Statement loans examine your personal or business income through deposits. DSCR loans only care about rental income the property generates.
Property use also differs significantly. You can use Bank Statement loans for homes you'll occupy or rent out. DSCR loans only finance investment properties you won't live in.
Documentation requirements vary between the two. Bank Statement programs need months of deposit records and may review tax returns. DSCR loans skip personal financial documents entirely, focusing on lease agreements and property appraisals instead.
Down payment expectations differ slightly. Bank Statement loans often start at 10-15% down. DSCR loans typically require 20-25% down, though this varies by lender and property performance.
Choose Bank Statement loans if you're self-employed and buying a home to live in. This option also works for Los Gatos investors who want income verification flexibility across their entire portfolio.
DSCR loans suit investors focused solely on rental properties. If you want to avoid personal income documentation entirely, or if you're building a large rental portfolio, DSCR financing streamlines the process.
Some borrowers use both loan types strategically. They might use a Bank Statement loan for their Los Gatos residence and DSCR loans for multiple rental properties. Each loan type serves a specific purpose in a complete real estate strategy.
Your choice depends on whether you're buying your home or an investment property, and whether you prefer income verification through bank deposits or property cash flow.
Yes, many investors use Bank Statement loans for their primary residence and DSCR loans for rental properties. Each loan serves a different purpose in your overall financing strategy.
Rates vary by borrower profile and market conditions. Both are non-QM loans with similar pricing structures. Your specific rate depends on credit score, down payment, and property details.
Bank Statement loans may review tax returns along with bank statements. DSCR loans typically don't require personal tax returns at all, focusing only on property income documentation.
DSCR loans often close faster because they skip personal income verification. Bank Statement loans need several months of deposit records, which can extend the documentation review process.
You can refinance from one loan type to another if your situation changes. Many investors start with Bank Statement loans and later refinance investment properties into DSCR loans.