Hard money loans are a special type of financing that allows a borrower to purchase property when a traditional mortgage isn’t appropriate or available. In many cases, hard money loans are secured by properties intended for business or investment purposes. However, owner-occupied hard money loans are also available for some borrowers.
What Does “Owner-Occupied” Mean?
An owner-occupied loan is a loan secured by a property that serves as the borrower’s primary residence. It differs from other types of mortgages, which are secured by investment or business properties. To qualify as an owner-occupied loan, the borrower must typically intend to occupy the home for at least 12 months after the loan closes. Some types of loans require proof of intended owner occupation.
Understanding Hard Money Loans
Hard money loans are loans secured by real property. They differ from conventional mortgages in several different ways. Some of the most notable differences between hard money loans and conventional mortgages include:
- Fewer qualifications – Hard money loans don’t require borrowers to meet as many qualifications as conventional loans. These loans don’t need to conform to the same standards as a conventional loan, so more borrowers are able to qualify. In many cases, approvals are also faster, and you won’t need to provide as much documentation.
- Quicker funding – Hard money loans are usually approved and funded faster than other types of mortgages, allowing the borrower to get the money he or she needs with less waiting.
- Higher interest rates – Because hard money loans require the lender to assume a greater amount of risk, they often involve higher interest rates than a conventional loan. Interest rates vary based on the borrower’s creditworthiness, as well as other factors.
- Shorter terms – Hard money loans often include shorter terms than a conventional mortgage. In many cases, borrowers eventually convert hard money loans to a conventional mortgage, or they sell the property and use the proceeds to pay off the loan.
Qualifying for an Owner Occupied Hard Money Loan
Before you can qualify for an owner-occupied hard money loan, you must first find a lender who offers this type of financing. Not every lender is willing to offer an owner-occupied loan, but owner-occupied hard money lenders do exist.
Once you have found a lender, you will still need to complete certain steps in order to qualify for the loan. All lenders will require you to provide documentation related to your income, such as tax returns or profit and loss statements. The purpose of this documentation is to prove that you have enough income to make your payments.
The lender will also want to verify the value of the property you plan to purchase to make sure it is worth enough money to provide collateral for your requested loan amount. In addition, your lender will review your credit history to make sure you aren’t too big of a risk.
After the lender has reviewed all of your documentation, you will receive a decision. If the lender approves your application, you will receive the funding you need to purchase your home.