Also known as consumer-purpose loans, owner-occupied loans are funds offered to finance a property which the borrower intends to occupy as a primary residence. Resource constraints, perceived risks, and low expertise are some of the challenges facing the private lending sector hence only a few provide owner-occupied hard money.

One of the most common inquiries from borrowers is whether they can obtain owner-occupied hard money loans for business. Yes, hard money providers can lend cash on owner-occupied homes provided the funds will be used for business purposes and not for family or personal use.

A good example of how to use owner-occupied hard loan is establishing an office in your area of residence using the hard cash.

Truth is people have many misconceptions regarding owner-occupied hard money lending. Is it a legal business? How about the requirements and why are they so rare? Who can use owner-occupied hard money and what are the advantages? Let’s find out.

Why are Owner-Occupied Hard Money Lenders Rare?

If you are keen, you may have discovered that most hard money lenders don’t provide owner-occupied financing. This is due to the stringent lending requirements for conducting this kind of business. The main reasons owner-occupied lenders may not lend for your primary residence include:

  • They need additional documentation
  • Lenders need additional licensing requirements 
  • The government exerts more stringent  regulations
  • Investment loans carry more risks
  • The time needed to fund the loan increases due to mandatory recession periods

Borrower’s Requirements

The act of lending owner-occupied hard money is absolutely legal. It’s only that there are several limitations regarding how much is charged and what can be done. Here is what you need to obtain owner-occupied hard money loans:

  • You must prove your ability to repay through a third-party agent
  • Hazard insurance and property taxes apply to high-cost loans, especially in the first year. The lender may not cancel the impound account, only the borrower
  • For a high-cost loan, you may request to be exempted from a prepayment penalty
  • Disclosure requirements should be met so that you completely understand the loan terms before signing the deal

This is just a snapshot of what goes on. Still, owner-occupied hard money lenders must follow other strict requirements.

Advantages of Owner-Occupied Hard Money Loans

Owner-occupied hard money loans are also available to borrowers with large down payments. Plus, the receiver should demonstrate their ability to meet monthly installments. An owner-occupied property can be anything from a condo, single-family house, duplex, triplex, or fourplex. The benefits available are as follows:

  • No upfront lender fees
  • No particular standards for credit score
  • Same-day pre-approval
  • Zero prepayment penalties
  • Quick disbursement of funds
  • No limitations for recent bankruptcy
  • Borrowers with a foreclosure can qualify
  • Recent short sales are not a hindrance

Who is it For?

A properly underwritten owner-occupied hard money loan is a great plan B especially when you cannot find a conventional mortgage unless you lose your original home. Alternatively, you can use owner-occupied hard money as bridge financing. Sometimes you need to buy time before you acquire a long term financing solution. In summary, you can always count on owner-occupied hard money lender if you are experiencing one of the following situations:

  • You are looking to buy a new house and have an old one to sell
  • Reverse mortgage fallout
  • Divorce and probate issues
  • You are downsizing but don’t want to make a double move
  • Foreclosure, short sale, BK …
  • You need a bridge loan so you don’t liquidate your assets to avoid taxation
  • Lack of down payment

In all the above circumstances, a traditional lending institution cannot and will not grant any loan. But a hard money lender will evaluate your financial baggage and if they feel that you qualify for a low-cost conventional loan, they advise you to try it first. If you don’t qualify, they will give you a hard cash loan.

Owner-occupied hard money loans are perfect for short-term use, 3 – 5 years. Make sure you have a solid plan if you are seeking long-term financing. If you have a credit issue, a hard money lender helps you to resolve it without losing your real property. Until the mandatory waiting time for your bad credit elapses, owner-occupied hard money will save your financial position big time.

Finding a Hard Money Lenders for an Owner-Occupied Loan

Despite everything we've outlined, it is still quite difficult to find a hard money lender who offers owner-occupied loans. Trying to navigate through the websites of each lender can be time-consuming and still leave you without answers. That's why we've created a solution to finding a lender for any type of hard loan you are looking for. Quickly tell us what your financing needs are, and we will immediately match you to lenders that fit your exact criteria.

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