What Are Owner Occupied Hard Money Loans

Owner-occupied hard money loans are a special type of real estate loan secured by property that you live in (your primary residence), but they come from private or non-traditional lenders—not banks or government-backed institutions.

These loans are different from typical hard money loans (which are mostly for investment properties) because they must follow more consumer protection laws due to the residential, owner-occupied nature of the property.

🔍 What Is a Hard Money Loan?

A hard money loan is a short-term, asset-based loan where the property itself is the main collateral. These loans are often used when:

Credit is poor or unverifiable
You need fast financing
Traditional lenders won’t approve the deal

🏡 What Makes Owner-Occupied Hard Money Loans Different?

Because you’re living in the property, federal and state laws (like Dodd-Frank and Truth in Lending Act) require additional borrower protections:

Feature	Owner-Occupied Hard Money	Investment Hard Money
Regulated	Yes (strictly)	Loosely
Income Verification	Required	Often skipped
Ability to Repay Rules	Enforced	Rarely required
Loan Purpose	Personal residence	Investment/business use
Higher Legal Scrutiny	✅ Yes	❌ No

💡 When Are Owner-Occupied Hard Money Loans Used?

These loans are rare but can be helpful in situations like:

You’re self-employed or have irregular income.
You’re in foreclosure and need a bridge loan.
You need to buy and renovate a fixer-upper you plan to live in.
You’ve been denied by traditional lenders due to credit or other issues.

📋 Typical Loan Terms

Interest Rate: 8%–12%+
Term: 6 months to 5 years
LTV (Loan-to-Value): 60%–75%
Down Payment: Often 25%+
Closing Time: As fast as 5–10 days

⚠️ Risks and Considerations

High interest and fees.
Short repayment periods.
Foreclosure risk if you can’t refinance or repay on time.
Must comply with Ability-to-Repay (ATR) laws and may require income docs, tax returns, etc.

✅ Tips for Finding a Good Lender

Look for licensed hard money lenders who understand consumer loan compliance.
Ask about prepayment penalties and balloon payments.
Make sure you have a clear exit strategy (refinance, sell, etc.).
Work with a real estate attorney to review the loan.

🏠 What Is a Bridge Loan?

A bridge loan provides temporary financing that helps you:

Buy a new property while waiting to sell your existing one
Access equity in your current home before it’s sold
Cover gaps in funding for time-sensitive real estate deals

It’s often secured by your current home or the home you’re buying.

💡 Example Scenario

You want to buy a new house but haven’t sold your current one yet.

Your current home has $200,000 in equity.
You need $100,000 for the down payment on the new home.
A bridge loan gives you access to that equity now.
Once your old home sells, you pay off the bridge loan.

📋 Key Features of Bridge Loans

Feature	Description
Term	Usually 6–12 months
Loan Size	Often up to 80% of your home’s value
Interest Rate	Typically 8%–12% (higher than traditional mortgages)
Repayment	Can be interest-only or deferred until home sells
Collateral	Usually your current home

✅ Pros

Fast access to equity
Helps you avoid contingent offers
Lets you act quickly in competitive markets
May allow no monthly payments until sale closes

⚠️ Cons

Higher interest rates and fees
Short repayment window
Risk of owning two homes at once
Could require good credit and significant equity

🏡 Who Uses Bridge Loans?

Homebuyers moving before selling their old house
Real estate investors needing temporary capital
Sellers buying a new home without waiting for a sale to close

Alternatives to a Bridge Loan

Home equity line of credit (HELOC) – lower rates, but harder to get if the home is listed for sale
Home equity loan – similar, but installment-based
Personal loan – limited amount, not tied to home
Borrowing from retirement or investments – last resort

Loan-to-Value (LTV) is a ratio that compares the amount of a loan to the value of the property securing it. It’s a key number that lenders use to assess risk in real estate financing.

📊 Loan-to-Value (LTV) Formula

$Value)×100\text{LTV} = \left( \frac{\text{Loan Amount}}{\text{Appraised Property Value}} \right) \times 100$

✅ Example:

Home value: $400,000
Loan amount: $300,000

$LTV=(300,000400,000)×100=75%\text{LTV} = \left( \frac{300,000}{400,000} \right) \times 100 = 75\%$

This means you’re borrowing 75% of the home’s value and putting down 25%.

🏦 Why LTV Matters to Lenders

LTV %	Risk Level	Notes
80% or lower	Low risk	Qualifies for best rates
81–90%	Moderate risk	May require mortgage insurance
91–100%+	High risk	Often not approved without special programs (e.g., FHA, VA)

Higher LTV = More risk for the lender
Lower LTV = Better terms for the borrower

💰 Impact of LTV on You

Area	Higher LTV	Lower LTV
Down Payment	Smaller	Larger
Interest Rate	Higher	Lower
Loan Approval	Harder	Easier
Private Mortgage Insurance (PMI)	Usually required >80%	Not required ≤80%

🔁 Common LTV Limits by Loan Type

Loan Type	Max LTV
Conventional	80% (97% with PMI)
FHA	96.5%
VA	100%
USDA	100%
Hard Money	60–75%
Bridge Loans	Typically 65–80%

🛠️ How to Lower Your LTV

Make a bigger down payment
Buy a less expensive property
Wait until home prices rise
Pay down loan principal

Owner Occupant Investment Property Loans

If you live in the Phoenix Valley and would like to get started with growing your real estate portfolio Brad Loans can help! Our lending service makes it easy for investors to finance new properties as owner occupants. We can work with bad credit, lend faster, and understand the real estate investment industry with decades of local knowledge in investing, fix and flip, and much more. Read about our loan programs by clicking here.

Call Today To Start Your Owner Occupant Loan 602-999-9499

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By craig braddick on June 1, 2025 / Investment Property Loans, Owner Occupant Loans