Investment Property Loan Options in California: Why Most Investors Start With DSCR

I’m Michael DiVita (DRE #01372066 | NMLS #241655), DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. When the bank says no, I find a way. Call (800) 239-1103.

The short answer: California investors have six main loan options: DSCR loans, conventional investment loans, bank statement loans, hard money, portfolio and blanket loans, and tapping equity in a home you already own. DSCR is the one most investors are looking at, because it qualifies on the property’s rent instead of your tax returns, works in an LLC and has no cap on how many properties you finance. Conventional loans usually have the lowest rate if you have clean, documented income and fewer than 10 financed properties.

The Options at a Glance

Loan	How you qualify	Typical down payment	Rate	Best for
DSCR	Property’s rent vs. the payment	Usually 20–25%	Higher than conventional	Self-employed investors, portfolio builders, LLC buyers, many short-term rentals
Conventional investment	Your income, credit and debt-to-income ratio	15% for 1 unit; 25% for 2–4 units (Fannie Mae)	Lowest for strong borrowers	Clean W-2 income, your first few rentals
Bank statement	12 or 24 months of bank deposits	Typically 20%+ for investment	Higher	Self-employed buyers whose deposits are strong but whose rent doesn’t cover the payment
Hard money	The property’s value and your exit plan	Varies; based on the property	Highest	Fix-and-flips, fast closes, distressed property
Portfolio and commercial	Lender-specific; often net operating income for 5+ units	Varies	Varies	Larger portfolios and buildings of 5+ units
HELOC on a home you own	Your income and the equity in that home	Funds the down payment on the new property	Variable	Owners with equity who want to buy without selling

Why Most Investors Start With DSCR

DSCR is the one most people are looking at, and for good reason. A DSCR loan asks one question: do the rents cover the payment, including taxes and insurance? It doesn’t ask for your tax returns, W-2s or debt-to-income ratio.

• No tax returns. Investors who write off a lot of expenses often look poor on paper. DSCR doesn’t care.
• Close in your LLC. DSCR lenders generally allow title in an LLC, usually with a personal guarantee.
• No 10-property cap. Fannie Mae limits you to 10 financed properties. DSCR lenders set their own limits.
• Interest-only options that can make the ratio work.

The trade-offs: the rate is higher than conventional, most DSCR loans carry a prepayment penalty (often one to five years), and you’ll usually need 20–25% down. Here’s a real example: a $1.6 million Los Angeles fourplex I closed on a DSCR loan, approved on $11,000 in rents with no income documents.

The Catch With DSCR: The Ratio Decides Your Down Payment

Here’s the difference most investors miss. On a Fannie Mae loan, you can buy a property with a set percentage down: 15% on a single-family rental, 25% on 2–4 units, as long as your income qualifies. With DSCR, there’s no set number. The ratios have to work. If the rent doesn’t cover the payment, you need to put more money down until it does.

Take the Los Angeles fourplex: $1.6 million, 20% down, interest-only at 7.5%, taxes of $1,665 a month and insurance of $600. The payment was $10,265 and the rents were $11,000, so it worked at 20% down. Now say the same building rented for $9,500 instead. To get the payment down to $9,500, the loan would have to drop to about $1,157,600, which means about $442,400 down. That’s nearly 28%, not 20%.

	Fannie Mae investment loan	DSCR loan
Down payment	Set: 15% (1 unit) or 25% (2–4 units)	Whatever it takes for rent to cover the payment, usually at least 20–25%
What decides it	Your income and debt-to-income ratio	The property’s rent vs. its payment
If the rent is low	Still works if your income carries it	Put more down, pick an interest-only option, or use a lower-ratio program

The $9,500 scenario is a hypothetical to show the math; it holds the rate, taxes and insurance the same.

When Conventional Beats DSCR

If you have strong documented income and fewer than 10 financed properties, a conventional investment loan is usually cheaper. On a $700,000 loan, a rate 0.75% lower is about $358 a month. It’s worth running both before you choose.

But the cheapest loan isn’t always the right one. Sometimes the DSCR loan is just easier if you don’t want to be bogged down with paperwork. A full-doc conventional loan means tax returns, leases and mortgage statements on every property you own. For a busy investor, paying a little more in rate to skip all of that can be worth it.

Short-Term Rentals and Properties With No Rental History

For an Airbnb or a property that’s never been rented, DSCR lenders can use market rent from the appraisal, or short-term rental projections, usually with a haircut. Fannie Mae also added a short-term rental income policy for conventional loans in 2026. See DSCR loans for short-term rentals.

How I Help Investors Choose

Send me the address, price, expected rent, taxes and insurance. I’ll run the DSCR ratio, price the loan both as DSCR and conventional across my wholesale lenders, and show you the difference in payment, down payment and prepayment terms before you make an offer.

Frequently Asked Questions

Related Resources

• DSCR Loans in California
• Case Study: $1.6M Los Angeles Fourplex on a DSCR Loan
• Mortgages for LLCs and Trusts
• DSCR Loans for Short-Term Rentals
• Fix-and-Flip Loans

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