The legal marijuana industry is booming in California. In 2021, there were over $5B in adult-use recreational sales. Yes, you read that correctly. Billion. With a “b”. Marijuana sales are coming from over 12,000 licensed cannabis companies in the state. So what happens when those who work for those cannabis companies want a mortgage? That’s where things get a little tricky.
Even though 48 states have legalized marijuana for medical and/or recreational use, marijuana remains a Schedule I narcotic at the federal level. Since residential mortgages are federally insured, those who work in the legal pot business have a very challenging path to get a conventional loan from a big bank. Many big banks will not approve a loan at all based on marijuana-related income, or completely discard income from cannabis business when reviewing an application.
A lender in Encinitas, CA is blazing a new path though. I hope you see what I did there. They started working with borrowers in the marijuana industry and using their income from that business as part of the loan application. Growers, distributors, and retailers are all welcome for this type of mortgage. This calls for a celebration! Before you spark a huge J and crank an old Phish show, please finish reading this blog post.
The terms of the mortgage that is being offered are bank statement loans. Bank statement loans are a long used alternative loan that’s popular with small business owners and the self-employed. Instead of using W2s and paystubs to verify income, lenders use 12-24 months of bank statements. They review the deposit history to come up with an average monthly income. This determines how much you can afford and therefore borrow.
Bank statement loans offer fixed and adjustable rate terms. Borrowers should also expect a down payment between 10-20%. Though there is no mortgage insurance that commonly accompanies a conventional loan, interest rates are higher with a bank statement loan.
If you work in the legal weed business and are interested in a loan, you’ll need to start with a broker. The lender does not work with borrowers directly. Let me suggest calling Truss Financial Group to help. They have experience helping those in the marijuana industry get these loans. Give them a call, and take the first step towards purchasing the house you’ve been thinking about.
Ok, now’s the right time to queue up your favorite version of Harry Hood.
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