Hard Money Lending on Primary Residence
Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes
Hard Money Lending on Primary Residence
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Don Konipol:
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.
I know relatively little of the specifics of how the SAFE Act and the CFPB apply to residential home loans, mainly because I invest and lend commercial property almost exclusively. @Chris Seveney and @Jay Hinrichs can specific information, thoughts, and qualified opinions.
the major issue with doing loans on Owner occ.. is you must be licensed MLO and NMLS registered and then you have to follow the qualification process.. IE fully underwrite to prove the borrower can make payments etc.. CA companies do these loans frequently not all HML in CA but a hand ful do them. And go through the extra steps for the larger loans they will do there in CA.. That makes it worth it to them. IE 1 to 5 mil dollar loans on primary residences Not many are going to do this in other parts of the country for 50 to 250k loans.
21 Replies
- Lender · Lake Havasu City, AZ · Member since 2024 · 700 posts · 285 votes1y
It varies a lot state to state
- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
I'm in New Mexico. I see that the max interest rate AND usury rate is 15%. For the loan amount, that's not going to be worth it to me. I was just wondering if there are any legal ways around this?
- 1yDon KonipolBusiness MemberInvestor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.I know relatively little of the specifics of how the SAFE Act and the CFPB apply to residential home loans, mainly because I invest and lend commercial property almost exclusively. @Chris Seveney and @Jay Hinrichs can specific information, thoughts, and qualified opinions.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Don Konipol:
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.I know relatively little of the specifics of how the SAFE Act and the CFPB apply to residential home loans, mainly because I invest and lend commercial property almost exclusively. @Chris Seveney and @Jay Hinrichs can specific information, thoughts, and qualified opinions.
the major issue with doing loans on Owner occ.. is you must be licensed MLO and NMLS registered and then you have to follow the qualification process.. IE fully underwrite to prove the borrower can make payments etc.. CA companies do these loans frequently not all HML in CA but a hand ful do them. And go through the extra steps for the larger loans they will do there in CA.. That makes it worth it to them. IE 1 to 5 mil dollar loans on primary residences Not many are going to do this in other parts of the country for 50 to 250k loans. - Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
Quote from @Jay Hinrichs: This makes a lot of sense. This is basically what I was thinking, but I appreciate your explanation. Thank you for replying.
Quote from @Don Konipol:
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.I know relatively little of the specifics of how the SAFE Act and the CFPB apply to residential home loans, mainly because I invest and lend commercial property almost exclusively. @Chris Seveney and @Jay Hinrichs can specific information, thoughts, and qualified opinions.
the major issue with doing loans on Owner occ.. is you must be licensed MLO and NMLS registered and then you have to follow the qualification process.. IE fully underwrite to prove the borrower can make payments etc.. CA companies do these loans frequently not all HML in CA but a hand ful do them. And go through the extra steps for the larger loans they will do there in CA.. That makes it worth it to them. IE 1 to 5 mil dollar loans on primary residences Not many are going to do this in other parts of the country for 50 to 250k loans.
- 1yJames LucentiBusiness MemberReal Estate Agent · Endicott, NY · Member since 2023 · 36 posts · 20 votes
lending on a primary residence is very different from investment property lending and brings a much stricter regulatory environment. Once you're dealing with an owner-occupied home, you enter the realm of consumer lending, which triggers federal and state laws like Dodd-Frank, TILA, RESPA, and possibly SAFE Act licensing requirements. Interest rates, fees, and terms must comply with usury laws, and detailed disclosures such as APR, payment schedules, and right of rescission may be required. You may also need to verify the borrower's ability to repay, including income and debt analysis. In some cases, loan originator licensing is necessary unless you partner with a licensed mortgage professional. If you're serious about exploring this, it's wise to work with a real estate attorney who specializes in consumer lending or collaborate with a licensed mortgage broker to ensure everything is handled compliantly. Happy to connect further if you want to talk through the details.
SVN Innovative Commercial Advisors526 Reviews- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
Quote from @James Lucenti: I agree in obtaining legal counsel. Thank you for the recommendation. I do not see myself moving in that direction, but I will certainly reach out to you if I do.
lending on a primary residence is very different from investment property lending and brings a much stricter regulatory environment. Once you're dealing with an owner-occupied home, you enter the realm of consumer lending, which triggers federal and state laws like Dodd-Frank, TILA, RESPA, and possibly SAFE Act licensing requirements. Interest rates, fees, and terms must comply with usury laws, and detailed disclosures such as APR, payment schedules, and right of rescission may be required. You may also need to verify the borrower's ability to repay, including income and debt analysis. In some cases, loan originator licensing is necessary unless you partner with a licensed mortgage professional. If you're serious about exploring this, it's wise to work with a real estate attorney who specializes in consumer lending or collaborate with a licensed mortgage broker to ensure everything is handled compliantly. Happy to connect further if you want to talk through the details.
- 1yDerek BrickleyBusiness MemberLender · Ann Arbor, MI · Member since 2021 · 683 posts · 232 votes
Hey Joshua,
Sounds fairly common, and there's actually other options that might be available. We do have no documentation loans on a primary residence that just rely on credit score, or there are no credit score options as well. Depending what you're trying to do, hard money might be a more costly way to go if possible at all.
Gold Star Mortgage Financial Group548 Reviews - Member since 2025 · 9 posts · 2 votes1y
I do these in Denver I have 1 lender that can fund them. And am always looking for more
- Lender · Member since 2021 · 498 posts · 131 votes1ySo many rules to consider when lending privately on owner occupied that it is often not worth it. It makes the hard money much harder. Have you tried a standard non-qm loan?
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
Quote from @Andrew Zamboroski: I'm slowly discovering that sticking to non-primary residence is the way to go. This loan isn't for me, but for a client of a colleague of mine. I was considering lending the funds, but it appears that it most certainly won't be worth it. Thank you for replying.
So many rules to consider when lending privately on owner occupied that it is often not worth it. It makes the hard money much harder. Have you tried a standard non-qm loan?Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.we buy loans on owner occupied.
1. Must use a licensed servicer
2. Might have to have a license, bond and surety (depending on state)
3. Must use licensed RMLO and originate per state and federal guidelines
4. Interest rates will be significantly lower and lower late charges, no default interest, no PPP.
5. Default resolution will take a lot longer.
If you are a business doing private lending, rule #1,#2 and #3 are do not loan to a borrower on a primary residence.
7e investments53 Reviews - 1yErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.In CA you can do them however, it is a very NICHE loan program. Very few hard money lenders will do it. But if it is actually a business purpose use (typically a cross collateral loan or Cash out 2nd Mortgage) they will do it.
I have not seen any hard money lenders lend on a primary purchase. You are better off doing a Non QM loan if you have trouble showing income.
LuxePrivate Investments LLC 572 Reviews- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1y
That makes sense, Erik. Can you explain to me what a cross collateral loan is? And how is a cash out second different than just a regular first lien position loan?
Quote from @Erik Estrada:
Quote from @Joshua Talamante:
I am wondering if anybody has knowledge/ideas on private lending on a primary residence. To date, I've only dealt with lending on investment property, thus falling into the business loan category. I've never done lending on a primary residence, and I understand the usury laws and such are much different. If anybody has experience in private lending on a primary residence, I would like to pick your brain.In CA you can do them however, it is a very NICHE loan program. Very few hard money lenders will do it. But if it is actually a business purpose use (typically a cross collateral loan or Cash out 2nd Mortgage) they will do it.
I have not seen any hard money lenders lend on a primary purchase. You are better off doing a Non QM loan if you have trouble showing income.
Sorry I’m late to this party, but your question is incomplete. @Joshua Talamante. The first question any private/hard money lender should ask is not who lives in the property, but what the money will be used for. Owner occupancy is all but irrelevant. If the use of the money is for a business purpose, most hard money lenders can loan against a personal residence. Dodd-Frank is clear on this.
From Dodd-Frank, loans made for personal, family, or household use are considered consumer-purpose loans and subject to TILA, RESPA, NMLS, etc., and all the associated disclosures. Most, but not all, hard/private money lenders do not have an NMLS registration, are not MLOs, and do not want to deal with the disclosures, consumer laws, and associated brain damage. This is generally the realm of conventional lenders.
Loans not made for personal, family, or household use are considered business-purpose loans and are exempt from Dodd-Frank (TILA), RESPA, NMLS, and all the associated rules and disclosures. This is generally the realm of private/hard money lenders.
Dodd-Frank even gives examples, here in quotes, noting that a “loan to improve a principal residence by putting in a business office” would be exempt from the regulations above. Similarly, a “loan to expand a business, even if it is secured by the borrower's residence or personal property,” would also be exempt.
On the other hand, if you borrowed money secured by the real estate of a gas station, which is clearly a business, and intended to use the money to send your daughter to college, then this would be a consumer-purpose loan and TILA, RESPA, NMLS, all disclosures, licensing, etc., would apply. Notice that owner occupancy is irrelevant in these contexts.
(Some states, such as Nevada, are different, as is lending on multi-families.)
The difference between business-purpose and consumer-purpose loans is easily one of the most misunderstood aspects of private lending.
What matters is the intended use of the money, not who lives in the property.
- Rio Rancho, NM · Member since 2017 · 17 posts · 5 votes1yThank you for your reply, @Jeff S. This is a new take on the matter. I hadn't heard it from this prospective. But let me clarify; are you saying that if I lend on a primary residence, for a non-personal reason, then this loan would not be subject to TILA, RESPA, etc, along with being exempt from usury laws?
Quote from @Joshua Talamante:
Thank you for your reply, @Jeff S. This is a new take on the matter. I hadn't heard it from this prospective. But let me clarify; are you saying that if I lend on a primary residence, for a non-personal reason, then this loan would not be subject to TILA, RESPA, etc, along with being exempt from usury laws?No, that’s not what I wrote. I did not use the words, “non-personal reason,” which could be anything. “Personal, family, or household purposes” is the literal definition in Dodd-Frank (and used by most other states).
Unfortunately, Dodd-Frank says there is no precise test for what constitutes a personal, family, or household purpose, so you’d be wise to take the road of conservatism. I suspect this is why most P/HMLs will not lend on an owner-occupied property, even though they could. That, or they don’t understand the law either, which is as likely.
Sidestepping the rules of consumer-purpose loan origination by labeling it a business-purpose loan has lately become one of the most common lawsuits in lending. This is not an area to mess with.
Nor did I address usury or licensing. These are defined by your state. In CA, for example, interest on any loan exceeding 10% APR is considered usurious. The good news is that the state provides dozens of exemptions. For example, real estate loans originated by a licensed CA DRE Real Estate Broker or DFPI CFL are exempt from usury and have no limit on the interest rate. Your state might have exemptions as well.
I’ll add that, since the max interest rate seems important to you—and usury aside—you do not set your maximum interest rate. The market does.
My strong suggestion, Joshua, is to spend an hour with a knowledgeable lending attorney in your state and go over licensing, usury, business-purpose versus consumer-purpose lending, and private money loan origination in general. Lending attorneys are not the same as real estate attorneys, so choose wisely. Perhaps ask a local, friendly P/HML who they use.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes1y
Quote from @Jeff S.:
Quote from @Joshua Talamante:
Thank you for your reply, @Jeff S. This is a new take on the matter. I hadn't heard it from this prospective. But let me clarify; are you saying that if I lend on a primary residence, for a non-personal reason, then this loan would not be subject to TILA, RESPA, etc, along with being exempt from usury laws?No, that’s not what I wrote. I did not use the words, “non-personal reason,” which could be anything. “Personal, family, or household purposes” is the literal definition in Dodd-Frank (and used by most other states).
Unfortunately, Dodd-Frank says there is no precise test for what constitutes a personal, family, or household purpose, so you’d be wise to take the road of conservatism. I suspect this is why most P/HMLs will not lend on an owner-occupied property, even though they could. That, or they don’t understand the law either, which is as likely.
Sidestepping the rules of consumer-purpose loan origination by labeling it a business-purpose loan has lately become one of the most common lawsuits in lending. This is not an area to mess with.
Nor did I address usury or licensing. These are defined by your state. In CA, for example, interest on any loan exceeding 10% APR is considered usurious. The good news is that the state provides dozens of exemptions. For example, real estate loans originated by a licensed CA DRE Real Estate Broker or DFPI CFL are exempt from usury and have no limit on the interest rate. Your state might have exemptions as well.
I’ll add that, since the max interest rate seems important to you—and usury aside—you do not set your maximum interest rate. The market does.
My strong suggestion, Joshua, is to spend an hour with a knowledgeable lending attorney in your state and go over licensing, usury, business-purpose versus consumer-purpose lending, and private money loan origination in general. Lending attorneys are not the same as real estate attorneys, so choose wisely. Perhaps ask a local, friendly P/HML who they use.
@Jeff S.: Is correct. And omits a lot of other things that are too numerous for a short reply.
However, @Joshua Talamante: to misunderstand a fairly simple explanation indicates trouble ahead for you if you don't seek help from local lending professionals on an on-going basis. Some loans go bad. So, at the very least you have legal ways to market, loan origination, underwriting, title, deeds, appraisals, servicing, collecting, book keeping, taxes, insurance, lates, notices, foreclosures, possibly bankruptcies, to name a few. You have Federal laws and state laws and "laws of profit and loss". And those laws have to be followed. You are responsible for those actions for years and years. The phrase "I didn't know" is invalid in court.
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