Everything you need to know when Looking for an Owner Occupied Hard money Loan

In the search of new properties, you may find yourself using the private home you occupy to acquire new property. If you cannot qualify for traditional lending and you have between 30 to 40 percent down payment, you can go to hard money lenders as a last resort. The hard money lender will offer a short-term solution in the property acquisition process.  

Here is a list of things you need to know about loans advanced on the home property you occupy:

You will have a difficult time accessing loans on private property you occupy

Until 2008, many lenders would give loans to a 60 percent or less LVT (loan-to-value ratio) without worrying too much about the lenders' repayment ability. Today, there are strict regulations that demand that a lender must record a borrowers ATR (ability to repay). This means that you might go through the same process you went through with the commercial lender who turned you down initially, forcing you to look for alternatives in hard money and private lending.

The 70% LTV Limit

If you make a 30 percent down payment, you can easily access an owner occupied loan. Hard money lenders often reduce the LTV to 50 percent or 60 percent in slow-moving rural areas.

A solid exit strategy

Ideally, you must have a solid exit strategy. If you had a foreclosure in the past two or three years, then you can use that as a plan. In conventional lending, you must wait for three years after a foreclosure before you can access a conventional loan again. This means that if your third foreclosure anniversary is close, you can access a conventional loan, which gives you a solid exit strategy.

Down payment sources

In traditional lending, you must follow strict regulation on proving where you are getting your down payment from and provide evidence on how long you have had the money in your accounts. In private money lending, your down payment sources do not matter, all you need is to prove your ATR and your equity position. This means you can use money from a business account or gifts from a friend.

Loan Duration

Depending on the lender, you can access owner-occupied loans for a duration of 11 months, I, 3,5,7 or 20 years.

Borrower Requirements

Some of the requirements you need when applying for an owner occupied property loan from a hard money lender include:

• A credit report
• Credit authorization
• Residential purchase agreement
• Escrow contact information
• Vesting
• 1003 loan application
• Borrower’s authorization Consumer loan disclosures
• Preliminary title report
• Up to 40 percent down payment
• Pay Stub

Availability of loans against two properties

Hard money lenders can do a blanket loan against two properties if you have substantial equity in the primary property listed for sale