Hard Money - No Owner Occupied?

Question

So far I have only looked into two hard money lenders but both have indicated the same thing in their website, they will not fund owner occupied dwellings. Does anyone know why this is? Are they concerned about the construction that was completed?

my thought was to purchase a property with cash, do the rehab, refinance it, then occupy it, but from what it sounds like this may not work for hard money lenders. I am curious as to why...any thoughts?

does anyone know of companies that would be willing to do this?

Tim Johnson · Answer

Talk to some local banks and do a construction loan.  I'm not licensed in your state but we do them all the time.  We require 10%-20% down depends on the number of units, and will lend up 75% ARV.  We run them thru Flagstar bank, so find a local branch or contact the wholesale deparment and they can connect you to a broker that is licensed in the area. This is a conventional loan product so DTI and all that junk comes into play.  You do have to use a licensed GC, so but the hoops to jump thru are about zero compared to an 203k loan.  So much easier quicker and less paperwork compared to 203k junk.

If the rehab is light, you can also do the homestyle loan, paperwork is about 90% less than 203k hoops

Michael Noto · Answer

From what I know you have a lot more protections and the process is a lot more drawn out to foreclose on an onwer occupant as opposed to someone who owns in an entity for investment purposes.

Odie Ayaga · Answer

The reason is because it's a whole different set of laws and rates for loans on owner-occupied properties. That brings in Dodd-Frank. The rates you get for hard money could be considered predatory lending if it's for owner-occupied.

Kevin Blanchard · Answer

@Michael Noto that kind of makes sense, but if the intention is to refinance and essentially pay off the hard money lender it is essentially the same as if you “fixed and flipped” it to someone else

Kevin Blanchard · Answer

@Jeff S. Thanks, I will definitely check that link out.

Kevin Blanchard · Answer

@Tim Johnson the reason is that I would need to get a FHA 203k loan, which is just painful.

Jeff S. · Answer

No, not a different set of laws and there are hard money lender who do this.  Just not that many.Asked and answered, @Kevin Blanchard, in this thread: Using Hard Money for Owner Occupied Rental

Manik Sewak · Answer

If you are rehabbing it and not occupying until refinancing then there shouldn’t be an issue in my opinion. Not exactly sure though.

Tim Johnson · Answer

@Kevin Blanchard why would you want to do hard money?  If it needs rehab just do a rehab loan for it and then you get the low down payment and 30 year fixed rate.

Kevin Blanchard · Answer

@Tim Johnson that is interesting. Perhaps the title can be transferred?

Hard Money - No Owner Occupied?

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