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in Farmersville, CA
Farmersville investors face a choice: DSCR loans for rental income properties or hard money for quick acquisitions and flips. Both skip your W-2 income, but they serve completely different strategies.
DSCR loans work when rental income covers the mortgage payment. Hard money works when you need speed or the property needs major repairs before it can cash flow.
DSCR loans qualify you based on rental income alone. If the property generates enough rent to cover the mortgage payment by a set ratio, you're approved. Most lenders want a DSCR of 1.0 or higher.
Terms run 30 years fixed or adjustable. Rates sit 1-3 points above conventional loans. You need 20-25% down and decent credit, usually 660 minimum. These work for buy-and-hold investors building portfolios.
Closing takes 25-35 days. You keep the property long-term and refinance later if rates drop or you want to pull equity out for another deal.
Hard money lenders fund based on the property's current or after-repair value. Your credit matters less than the deal itself. They'll lend on properties that can't qualify for traditional financing because of condition or lack of rental history.
Rates run 9-14% with 2-5 points upfront. Terms are 6-24 months because these are bridge loans. You're expected to refinance into permanent financing or sell the property before the term ends.
Closing happens in 7-14 days. Hard money works for distressed properties, auctions, or competitive markets where cash-equivalent offers win. Expect to pay higher rates for that speed and flexibility.
DSCR loans cost less but take longer and require stabilized properties. Hard money costs more but closes fast and funds properties that need work. DSCR wants rental income history. Hard money only cares about equity.
Your down payment differs too. DSCR needs 20-25% down. Hard money can go up to 35-40% LTV depending on the project. DSCR checks credit scores. Hard money focuses on your track record and exit strategy.
The biggest split is timeline. DSCR is permanent financing you hold for years. Hard money is temporary bridge financing you exit within 12-18 months through a sale or refinance into DSCR or conventional.
Choose DSCR when you're buying a rental that already has tenants or can rent immediately without repairs. The property needs to generate enough income to meet the DSCR threshold, and you plan to hold it long-term.
Choose hard money when speed matters, the property needs significant work, or it can't qualify for traditional financing yet. You need a clear exit plan to refinance or sell within 12-18 months.
Some Farmersville investors use both in sequence. They buy a distressed property with hard money, rehab it, stabilize tenants, then refinance into a DSCR loan to lock in permanent financing at lower rates.
Minor cosmetic work is fine, but major structural repairs won't qualify. DSCR lenders need the property rent-ready with verifiable income potential.
Most hard money lenders offer extensions for 3-6 months at higher rates. Plan your exit before you sign to avoid getting stuck in expensive short-term debt.
Yes, most lenders want 6-12 months of mortgage payments in reserves. The exact amount varies by lender and how many properties you already own.
Experienced lenders prefer track records, but new investors can qualify with a solid deal and larger down payment. Your exit strategy matters more than your resume.
DSCR works if there's documented rental income from the land. Hard money works better for raw land purchases or properties with unclear income history.