Posted over 5 years ago

Why Don’t Most Lenders Offer Owner Occupied Hard Money?

Finding someone who will provide isn’t always easy. However, it’s still out there and you can get financed if you know where to look.

In order to understand why is harder to come by, you have to break down what exactly it is, how it works, and who uses it. Unlike traditional loans which are essentially offered on a promise to repay and are based on a borrower’s good standing, hard money is collateral-based. That means the borrower has something of value and that item is used to secure the loan. In most cases, it’s a home or commercial property. Because of this, things like the borrower’s credit don’t impact approval a whole lot, so the loans are leveraged quite a bit by small-business owners and real estate investors.

The other big difference is that the funding typically comes from private investors rather than big banks, so the terms will be different as well. Oftentimes, alternative funding opens up doors for people because the terms are far more flexible than traditional loans.

The catch comes in when the owner intends to live on the property. That means it’s no longer a commercial loan for business purposes, but is more along the lines of a traditional mortgage. As such, the loan is subject to more regulations than it otherwise might have been. For example, a third party has to verify that the borrower has enough income to repay the loan, there’s greater tax and insurance oversight, and the full disclosure process must be seen to. This means that that’s normally a simple process that can be seen to in a matter of days could take a month or longer, and the work a lender must do is amplified quite a bit. So, it’s totally understandable that a whole lot of alternative lenders don’t want to get involved with them.

If You Have a Business Purpose, it’s Easier to Get Alternative Financing

That said, there are times you may still really want to use . For example, if you’re doing a fix-and-flip, but plan to live in the home while you’re doing the work. It’s times like these that your project may genuinely be considered a commercial one, in which case, it’s easier to qualify.

Work with a broker who understands your goals and regulations to improve your chances of getting funded.

Although it may be harder to get , it’s not unheard of. A seasoned broker will explore lots of options and will find a funding source that works for your needs. From going with a standard fix-and-flip loan through options like bridge loans and blanket loans, there are many methods to get your project off the ground, even if you plan to live in the house for the duration of the loan. Start by finding a broker who knows the industry well and works with a number of lenders and you’ll find a solution that’s right for you.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
[email protected]
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.