Homeownership remains one of the greatest American dreams. Sadly, most traditional lenders find it hard to bend their loan approval criteria to accommodate hopeful clients. Bad FICO scores, bankruptcy, forbearance notice, or recent foreclosure may make individuals virtually untouchable to banks and other conventional financing institutions.

There’s Still Hope With Hard Money Lending

Close to 31% of Americans have low or subprime credit scores, according to FICO. Poor credit scores may not absolve you from needing repairs for your home, moving to a new location, or needng capital for business expansion. Your FICO scores may keep traditional financial institutions away. Hard money lenders are a great alternative to banks, offering residential owner occupied loans.

Owner occupied loans allow you to use your primary residency as collateral to finance your deal. The hard money loans do not base the loan approval on your credit scores as the only primary factor. The value of the property you wish to buy or are currently living in is a critical factor. Additionally, you may need to provide an exit plan to the lender showing how you will repay the loan.

Private Money Lenders for Residential Owner Occupied

Residential owner occupied loans are less common, so not every private money lender deals with them. These loans are riskier and more heavily regulated than your standard hard money lending. Due to the Dodd-Frank reforms adopted after the 2009 financial crisis, lenders need to provide extra documentation, have additional licensing, and grant their clients a mandatory recission period. You may need to do your homework before picking out a private money lender to issue you with an owner occupied loan.

Here are the benefits of using residential owner occupied loans:

1. Flexible Requirements for Approval

Hard money loans in California have a less stringent approval process than traditional financing. Your bank may rely heavily on your credit score, while the private money lender will be more interested in the total equity on your property before making a lending decision. Your loan-to-value ratio and debt-to-income ratio are critical components of the underwriting process. Hard money lenders are less risk-averse than traditional banks.

2. Access to Both Consumer and Business Purpose Loans

Hard money lending is available for Californians that own a home and wish to use the property as collateral for their businesses. Residential owner occupied loans can fund business-related activities such as operating capital, purchasing new equipment, or expansion programs. This type of loan differs from consumer-purpose loans that a borrower uses to purchase a primary residence or consolidate their personal finances.

3. Quicker Loan Processing

Traditional banking systems may take an average of 45 days to have your mortgage application accepted. Even then, you may receive a conditional approval where you may have to provide additional documentation. A few months down the line, you may have your loan denied. Residential owner occupied loans by private money lenders may require less than seven business days for the loan to be processed.

Residential owner occupied loans provide an excellent alternative to homeowners who would wish to access short-term credit by using their home as collateral. They can enjoy a less bureaucratic process and a faster closing. To discuss your pre-approval for an owner occupied loan, reach out to ARC Private Lending.