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OO or NOO HARD MONEY
OO or NOO HARD MONEY
Terms: 10.5%IO 5Y Balloon 1Y Prepay | 3.5% Cost + $995 Doc Prep $125 Wire Fee + Title/Escrow and Broker/MLO Fees
Gift or Seller Carry – GOOD TO GO!
Available in CA AZ NV CO
50-60%LTV to $350-450K Loan Amount in CA | OO OK w/business purpose (Verified only by LOE)
40-50%LTV in CO AZ NV
INV PROP Preferred | if Owner Occ, must have a solid business purpose!
No Income/Assets/Appraisal | NO MIN FICO!
SFR | 1-4 Unit | PUDs OK – NO Condos ever. Sorry!
*No Licensing Required!*
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Owner-Occupied (OO) vs. Non-Owner-Occupied (NOO) Hard Money Loans: A Comparative Overview
Within hard-money lending, OO refers to Owner-Occupied and NOO to Non-Owner-Occupied. This distinction is significant because occupancy status, loan purpose, and regulatory requirements directly influence the available financing options.
1. OO Hard Money Loans (Owner-Occupied)
An owner-occupied property is one in which the borrower resides and designates as their primary residence.
Obtaining traditional hard-money loans for owner-occupied residences is often challenging, as consumer mortgage regulations typically apply to loans intended for personal, family, or household purposes.
Owner-occupied hard money loans can include:
- Consumer mortgage licensing requirements.
- Ability-to-Repay (ATR) requirements when applicable.
- Federal and state disclosure requirements.
- Higher interest rates and origination fees.
- Additional restrictions on balloon payments, prepayment penalties, and other loan terms. It is important to note that a loan secured by a primary residence is not always classified as a consumer loan. If the loan is genuinely for business purposes, certain exceptions may apply, subject to specific circumstances and state regulations.
2. NOO Hard Money Loans (Non-Owner-Occupied) Hard money loans are typically utilized for investment properties in which the borrower does not reside.
Common examples include rental properties, fix-and-flip projects, renovations of investment assets, and short-term financing for real estate investors.
These types of loans often include:
- Asset-based underwriting emphasizing collateral value.
- Loan-to-value (LTV) or loan-to-cost (LTC) limits.
- Short-term financing, usually lasting from 6 to 24 months.
- Interest-only payment options.
- Financing may be based in part on the property’s after-repair value. An exit strategy, such as property sale or refinancing, is typically required. Depending on the specific program, documentation requirements for traditional income verification may be reduced.
Loans utilized to acquire, renovate, or maintain non-owner-occupied rental properties are generally classified as business-purpose credit under Regulation Z. Which Is Easier to Finance?
NOO Non-owner-occupied hard money loans are generally more accessible, as most hard money lenders prioritize business-purpose investment financing. Financing is more limited, especially if the borrower wants to use their main home as collateral for a personal loan. The main compliance point is that where you live and why you need the loan are separate issues. You cannot just call a personal mortgage a business loan to get around the rules.
Key Consideration for Gustan Cho Associates: Is the objective to establish owner-occupied and non-owner-occupied hard money loan programs with wholesale lending partners, or to determine the eligibility of a specific borrower?
Guidance is available regarding requirements for wholesale correspondents or brokers, licensing regulations, underwriting standards, and the legal establishment of both loan programs.
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