In California, there are select circumstances in which an individual could get a Hard Money Loans California Owner Occupied. Hard money loans are business purpose loans, so in order to lend on an owner occupied property, there must be a business purpose reason behind it.
With an investment property, the business purpose reason is typically that the funds will be used towards the property (remodels, paying off business liens on the property, fix and flips, etc). However, on a primary residence, you cannot apply for the loan using similar reasons – like remodeling the home, or adding on solar, as it is your primary residence – and those would be consumer purposes. Some examples of business purpose reasons, for California owner occupied hard money loans, would be:
- A self-employed borrower, looking to use the cash out to grow or start their own business.
- Marketing costs, such as website building, social media development, or lead costs.
- Equipment costs, such as business vehicles, office space furnishings, technology costs, tools, etc.
- Funds to invest in commercial space, such as purchasing an office or renting an office space out.
- Inventory costs, such as wholesale purchases, stocking costs, and inventory storage.
- Labor costs, such as the upfront costs of scaling your business and hiring more employees.
- If starting a business, LLC, and licensing fees, as well as training costs.
- A borrower who is looking to use funds to invest in real estate for investment purposes.
- Funds for a down payment on an investment property.
- Funds used to turn a space into a short-term rental or a long term rental.
- Funds used for a down payment on a commercial space.
- Funds used for the remodeling of an investment property.
For certain states, either due to regulation or due to lender requirements, hard money loans may only be available for investment properties. However, in California, there are certain circumstances where they can be done on a primary residence/owner occupied residence. If you have a business reason, it may be worth investigating if a hard money loan is the right fit for you.
Some real examples from people we have worked with in California, have included:
- A self-employed client, needing to pay off business related debt, in order to reduce their overall business costs.
- A business owner, who owned a restaurant, and needed new equipment for the kitchen.
- A hair salon owner, who needed to change their salon location and purchase new equipment for stations; as well as inventory.
- A self-employed client, who needed funds to open an LLC and hire a website developer, as well as a copywriter, for their pay per click campaigns.
- A contracted truck driver, who needed new equipment.
- A streamer, who needed new video/sound equipment, and studio equipment. Funds were also needed to hire a video editor for their content creation.
- A personal trainer, who needed fitness equipment for their own independent studio.
At Independent Home Finance Inc., we specialize in Hard Money Loans California Owner Occupied and working with our clients to help them find the right loan term and type for their needs. One unique aspect about hard money loans is that credit has less impact on qualifying, so for an individual who has a credit score under 550, it still may be possible to get approved. The two factors that have the most impact for qualifying will be having a valid business purpose reason for funds, and the equity position available in the home. For most of our California hard money lenders and investors, they want to lend under 60% loan to value. Meaning that for the value of your home, any loan amount of cash out amount must be less than 60% combined loan to value.
For a Hard Money Loans California Owner Occupied, it is also possible to do a 2nd mortgage. Sometimes, it may be more economical to do a 1st refinance – but for smaller loan amounts, a 2nd may be better for your wallet.
In a refinance, a 1st refinance would entail paying off any existing liens/mortgages and creating a new 1st. In a 2nd, the 1st mortgage would remain, and you would continue to make payments on it. The 2nd mortgage you would also make payments on, but it will exist simultaneously with the 1st mortgage. So, if you have a great rate and a high balance on the 1st, refinancing it may not be the best option, and that is when we would investigate doing a 2nd hard money loan.
Hard money loans in California are rather common, not just for their flexibility, but due to the nature of the real estate scene in most California counties. In areas like Orange County, Los Angeles, San Diego, and the Bay Areas, homes tend to have a very high value which can increase the equity available. With homes that have a lot of equity, it is easier to do a hard money loan and stay below that 60% loan to value. Furthermore, we have a large community of self-employed individuals, business owners, and gig workers – so many individuals turn to hard money, as a way to help grow their business.
Here at Independent Home Finance Inc., we’d be happy to listen to your situation and see how we can help. We offer free consultations and have decades of mortgage lending experience. Reach out today, to see how we can help!