Stop using hard money for buy-and-hold.

Hey guys, I'm Nick Saeva I'm a mortgage broker in Utah and I have this conversation weekly, so I figured I'd write it up once.

A new investor finds a rental, calls a conventional lender, gets told no because of DTI or because their tax returns show almost nothing after write-offs. So they go to hard money at 11-13% plus 2-3 points, planning to "refinance later."

Sometimes that's the right call. Often it isn't, because there was a third option nobody mentioned.

DSCR loans qualify on the property, not you.

DSCR stands for debt service coverage ratio. It's just rent divided by PITIA. If the property covers its own payment, that's the qualification. No tax returns, no W2s, no personal DTI calculation.

$2,400 rent ÷ $2,000 PITIA = 1.20 DSCR. Done.

Where the ratios actually land right now:

• Most lenders want 1.0 or better. Some allow below 1.0 with tradeoffs.

• Loans under $150k often require 1.25 instead

• 80% LTV is achievable on purchases with a 700+ FICO

• FICO floors run 620-640 depending on the lender

• Reserves range 0-6 months PITIA, and some lenders waive them entirely under certain loan amounts

• No cap on how many properties you own, which is where conventional kills most investors at 10

The cost comparison people skip:

On a $400k purchase at 75% LTV ($300k loan):

• Hard money at 11.5% + 2 points: roughly $2,875/mo interest-only, plus $6,000 upfront, plus refinance costs later

• DSCR in the low-to-mid 7s: roughly $2,100/mo P&I, no second closing

That's about $775/month, plus you're not paying to close twice. Over an 18-month hold that difference is real money.

When hard money genuinely is correct:

• Heavy rehab where the property won't appraise or won't rent yet

• Closing in under 10 days

• Auction purchases

• Anything where the property can't produce income at close

DSCR needs a property that rents. If it doesn't rent yet, DSCR doesn't work. That's the actual dividing line — not your credit, not your income.

The trap: "I'll just refinance later" assumes rates and guidelines cooperate. If you couldn't qualify conventionally going in, plan on the exit being DSCR anyway. So run those numbers first and skip the extra closing costs.

Happy to answer questions on any of this. Ratios and LTVs vary by lender and change regularly, so treat the numbers above as a snapshot, not a quote.