Neuswanger: Cannabis workers face challenges for home loans (column)
As Colorado’s cannabis industry matures, more and more employees of marijuana companies are finding their career niche in the industry but are challenged in accomplishing their personal goal of buying a home due to the conflict between the federal and state laws governing dealing with the industry.
One area of conflict is whether federally backed mortgage loans should be available to employees of businesses that are legal under state law but illegal under federal law. As most mortgage loan programs are to some extent backed by federal guarantees via the Federal Housing Administration, U.S. Department of Veterans Affairs, U.S. Department of Agriculture or Fannie Mae or Freddie Mac, the debate has gone on as to the propriety of using federal resources to back loans to the employees or owners of marijuana businesses.
While most of the federal housing agencies have opted to not approve loans to anyone having anything to do with the pot business, and all refuse to lend to anyone with a direct ownership in such a company, there are options for employees who are not part owners.
Fannie Mae, which is the largest owner of federally backed mortgage loans, has opened its programs to employees who are paid by a W2 and otherwise meet the requirements in terms of credit, income and assets.
The options locally for an employee on the Green Mile include loans to purchase or refinance a home. Purchase loans can be made with as little as 3 percent to 5 percent down and fixed-rate terms up to 30 years. The maximum loan limit in Eagle County is $636,150.
These loans are available for the purchase and refinance of most condos, townhomes, deed-restricted homes and duplex and single-family properties. They will not work for a condo-hotel property and exclude some mixed-use properties such as Riverwalk at Edwards, which contains commercial and residential units.
Qualifying for these loans is just like any other mortgage loan. The borrower must have acceptable credit, a steady income adequate to qualify for the payments and a down payment.
Like any home loan, the more you put down, the easier the qualifying will be and, to an extent, the lower the rate. If a buyer can put 20 percent down, he or she can avoid mortgage insurance, which is a form of insurance the borrower pays for monthly to insure if there is a default the lender gets the money out of the loan.
If the property is in a condo-hotel or mixed-use project such as the Riverwalk, then there are other options available through private portfolio lenders, but they require a substantial down payment of 25 percent to 30 percent, and the rate will be a bit higher than for a conventional property. Loans for these types of properties are amortized over 30 years, but the rate would be fixed for five to seven years, generally.
In all cases, the borrower must be a W2’d employee. Those who are 1099’d or have ownership in the company are, unfortunately, not eligible.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage-related questions from readers. His website and blog can be found at http://www.mtnmortgageguy.com.
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