Securing financing can be difficult, especially if you are in the market for owner occupied hard money loans. California lenders, much like other lenders, are not necessarily quick to offer owner- occupied financing but that does not mean you don’t have any options.
If you have been in the real estate investment business for some time, you are probably well aware that it is not easy to secure owner-occupied hard money loans. California lenders who offer hard money financing often shy away from the additional regulations or red tape that is placed on owner- occupied properties. However, the good news is not all California lenders fear the challenge.
The reality is that some lenders have the impression that due to the additional regulations it is almost illegal to offer these particular types of hard money loans. California being almost the mecca of lenders it seems that there would be more clarity on the subject here. But, the truth is that many lenders are still in the dark about owner occupied property regulations and hard money. So, at this point, you are probably wondering what the deal is? Can you secure hard money financing for owner-occupied properties or not?
Well, unsurprisingly, the answer is a little complex. Nevertheless, it is important to highlight the fact that owner occupied properties secured via hard money is perfectly legal. The difficulty here lies in the overwhelming misconceptions about owner-occupied lending laws. Moreover, for most lenders, it boils downs to the limitations placed on them in terms of fees and so on. Thus, lenders shy away. But, what does that mean for you? It means that you need to do your due diligence and find a lender that understand your vision, the lending laws and is willing to do the work with the regulations. This may seem like a tall order, but no one ever said getting what you want would be easy.
In addition to having a limit to the fee amount that can be charged, owner occupied loans also come with a few more requirements. For instance, a borrow income has to be verified via a third party source. Moreover, if the loan falls under the high-cost loan category then hazard insurance along with property taxes needs to be collected via an impound account for the first year. Along those same lines, a high-cost loan can also mean prepayment penalties are an issue for the lender. In fact, lenders must offer loan option that does not have prepayment penalties in this event. There are also similar disclosure regulations and requirements that one would typically see with bank or traditional lending institution loans.
The real deal
Ultimately, these are the main regulations that cause many lenders to not offer owner-occupied hard money financing. But, as you can see, these regulations and requirements are not necessarily the end of the world. Therefore, if you are in the market for this particular kind of financing, do not be deterred by lenders who are unwilling to abide by these requirements.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.