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in Saratoga, CA
Saratoga real estate investors face a choice between two distinct financing strategies. DSCR loans offer long-term rental property financing based on property income, while hard money loans provide quick funding for acquisitions and renovations.
Both loan types bypass traditional income verification requirements. Your investment timeline and property strategy determine which option serves you best in Santa Clara County's competitive market.
DSCR loans qualify investors based solely on rental property income. Lenders calculate the debt service coverage ratio by dividing monthly rent by monthly mortgage payment, typically requiring a ratio above 1.0.
These loans function like traditional mortgages with 15-30 year terms. Investors can finance rental properties without documenting W-2 income or tax returns, making them ideal for portfolio expansion.
Rates vary by borrower profile and market conditions. Down payment requirements typically range from 20-25% for investment properties in Saratoga.
Hard money loans are short-term financing tools secured by the property itself. These asset-based loans focus on the property's value and potential rather than borrower income or credit scores.
Funding typically closes in 7-14 days, much faster than conventional options. Terms usually run 6-24 months, designed for fix-and-flip projects or bridge financing until permanent funding becomes available.
Interest rates are significantly higher than DSCR loans due to the speed and risk profile. Investors use hard money when timing matters more than cost, particularly for competitive Saratoga properties.
Timeline separates these options most dramatically. DSCR loans take 30-45 days to close but offer 30-year terms, while hard money closes in weeks but requires repayment within two years.
Cost structures differ significantly. DSCR loans carry rates closer to conventional mortgages, while hard money typically costs 8-12% plus points, reflecting the speed and flexibility provided.
Purpose drives the choice. DSCR loans work for income-producing rentals you plan to hold, whereas hard money fits acquisition and renovation projects with defined exit strategies.
Choose DSCR loans when building a rental portfolio in Saratoga. If the property generates sufficient rent to cover mortgage payments and you plan to hold long-term, DSCR financing offers stable, affordable terms.
Select hard money when speed or property condition matters. Buying a fixer-upper at auction, competing against all-cash offers, or purchasing properties that need renovation before qualifying for traditional financing all favor hard money.
Many investors use both strategically. They might acquire and renovate with hard money, then refinance into a DSCR loan once the property is rent-ready and generating income.
DSCR loans work for rental properties, not flips. They require the property to generate rental income immediately. For renovation projects, hard money provides the short-term funding you need.
Hard money loans typically close in 7-14 days, making them competitive with cash offers. DSCR loans take 30-45 days, similar to conventional mortgages.
DSCR loans generally require credit scores of 620-680 or higher. Hard money lenders focus more on property value and may accept lower scores, though rates reflect the added risk.
Yes, this is a common strategy. Investors use hard money to acquire and renovate, then refinance to a DSCR loan once the property is rent-ready and generating consistent income.
DSCR loans typically require 20-25% down for investment properties. Hard money often requires 25-35% down, though this varies based on the property's after-repair value and project scope.