Owner Occupied Hard Money Lenders – Hard Money Loans for Primary Residences in California
North Coast Financial are owner occupied hard money lenders based in San Diego providing financing options for borrowers in need of hard money loans for their primary residence in California.
The majority of hard money lenders do not offer residential hard money loans on owner occupied properties but rather focus solely on investment property loans. This is primarily because hard money owner occupied loans require much more documentation, are subject to additional regulations, have mandatory rescission periods which drastically increase the time to fund the loan and overall have additional risks the lender must assume.
Hard money loans for owner occupied homes are still subject to federal regulations such as Dodd-Frank which require the borrower to verify their income. Income verification is usually accomplished by providing the lender with paystubs, W2s or tax returns. The borrower is also required to keep their debt to income (DTI) under a certain ratio. The borrower’s existing debts including other mortgages, car payments, credit card payments and other debts will be considered in the ratio as well as the new proposed mortgage obligations (mortgage payment, taxes and insurance).
Why Borrowers Obtain Owner Occupied Hard Money Loans?
There are many situations which cause a homeowner to be denied by banks and credit unions and turn to hard money loans for their primary residence:
- The borrower has poor credit
- The borrower has a recent foreclosure, bankruptcy, short sale or loan modification
- The borrower has less than 2 years of employment history with their current employer
- The borrower is self-employed
- The borrower is a foreign-national
Owner Occupied Hard Money Loans are for Short Term Use Only
Hard money loans (for investment or owner occupied properties) are for short term use only, generally 3-5 years. Especially in the case of an owner occupied borrower, the borrower must have a reasonable plan in place to obtain long term financing. This usually involves taking the necessary steps to repair credit in order to qualify for a conventional loan or postponing applying for a conventional loan until the mandatory waiting period after a significant derogatory credit event such as a bankruptcy, short sale, foreclosure or loan modification has passed.
The Fannie Mae minimum mandatory waiting period after a pre-foreclosure, bankruptcy or short sale used to be 4 years. The minimum mandatory waiting period for these events has recently been shortened to 2 years.
Owner Occupied Hard Money Loans for 2nds
If a borrower currently has a conventional bank loan (1st loan) on their property and has enough equity they may be able to take out a 2nd loan against their home. Homeowners often choose to take out a hard money 2nd against their property when they aren’t able to qualify for a Home Equity Line of Credit (HELOC) but still need to borrow against their property’s equity.
The interest rate on a hard money loan is higher than on a HELOC but it would be a financially wise decision if the loan proceeds are used to pay off credit cards or pay down other types of high interest debt.