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Loan, Real Estate

Owner-Occupied Loan Qualifications

Do I Qualify for an Owner-Occupied Loan?

Real estate is a great tool for your financial future. Whether as an investment piece in your portfolio, adding passive income to your wallet, or having a place to stay without worrying about losing money paying rent, owning property builds financial security. Real estate can also be intimidating to break through, especially if it is your first time buying and you are unsure as to where to begin. When looking to purchase real estate for property where you will be the primary resident, there are a few helpful questions to ask and be prepared for as you begin your journey. In this article, we will walk you through how to know if you can qualify for an owner-occupied loan, and what to prepare as you begin your real estate journey. 


Considerations for Loan Qualification

  1. Credit Score: Unlike a conventional loan, owner-occupied hard money loans do not rely heavily on personal financial history. Since the property itself acts as collateral, applicants do not have to have a perfect credit score in order to receive a loan. However, borrowers should still be aware that lenders will check their credit scores. The better the credit score, the better the chances of qualifying for the loan, so it is still something to consider when applying.


  • Savings: Another factor to consider is your savings account. Since there is usually more risk involved with hard money loans, borrowers are often required to put down a higher down payment. This shows commitment from the borrower’s side and allows investors to see that you are interested in making this a success. For owner-occupied loans, borrowers should be prepared to spend between 25-30% for a down payment.

  • Debt-to-Income Ratio: The final factor to consider is the debt-to-income ratio. This is your pre-tax monthly income versus how much you spend on expenses such as housing. This will allow lenders to see whether you make enough to pay back the debt, which is why things such as proof of employment or payment stubs may be required in the process.


Steps for an Owner-Occupied Loan


  1. Finding the Right Lender: Not all lenders are made equal. In fact, choosing the correct lender is critical to successfully landing and repaying an owner-occupied loan. In looking for the right lender, you want to find someone with experience in the geographical area you are looking at, while also having a history of trustworthiness when working with borrowers. Companies such as JMJ Funding, for example, have over 28 years of matching trustworthy lenders to borrowers who are looking for an owner-occupied loan.


  • Deciding It’s Time: If you are someone who wants to own their own property but may not have the personal financial history to qualify, owner-occupied loans are great alternatives. Once you have solid savings for a down payment and a tight repayment plan, you are ready to venture into the owner-occupied world.

Minimum Hard Credit Checks: As with any financial advice, it is important to keep debt down and pay it off so that it is no more than 30% of your credit ability. Make sure to stay up to date with bills and pay down any past-due arrangements. This will ensure once it is time to run a hard check, it will have a minimal effect on your credit score, helping you for future financial ventures.

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