January 30th, 2020 Update: Fannie Mae Direct loans are now available to any employee in the cannabis space. This was not the position when this article was written, so contact us for more information.
According to an article from Business Insider, the marijuana industry in the United States brought $52 billion in total annual sales. Flow Hub, a support-based company that assist marijuana businesses with compliance and other issues, says that medical use is now legal in 33 states, while recreational use is legal in 10 states. In Maryland alone, which only has medical marijuana, the industry holds sales of nearly $100 million.
With growing legalization and decriminalization across the country, the industry is booming. In 2018, investors poured $10 billion into the cannabis market, and the industry as a whole is expected to be worth roughly $16 billion by the end of 2019. By 2030, the cannabis industry in the United States could be worth $30 billion.
With all of this money flowing in and out of the industry, there is an obvious need for employees. Jobs, as you might expect, are growing right alongside the cashflow. The article from Flow Hub says that demand for employees in the cannabis industry was up 76% from December of 2017 to the end of 2018.
We could spend this entire article throwing out numbers that display the incredible growth of the industry, but you’re probably wondering why this is a concern for a loan agent.
It’s a concern because the cannabis industry is facing challenges for financing at many levels. The industry as a whole experiences difficulty finding businesses loans, and individuals working in the sector are often shut out from traditional forms of lending. People working in perfectly legal cannabis positions are being denied car loans, credit, and mortgages.
But there is a solution. By working with the right lender, and preparing the right documents, you can get a top-quality loan for your home purchase.
Getting a Mortgage Loan While Working in the Marijuana Industry
Why is is Difficult for Marijuana Workers to Get a Mortgage Loan
The main reason why many people find it difficult to get a loan while working in this business is simple: federal law states that marijuana is illegal. Because all banks in the United States are subject to federal law, they must adhere to the national regulations, and because marijuana is classified as a Schedule I drug (a category that also includes heroin, ecstasy, and LSD) there are clear roadblocks to financing.
When securing a loan, you will need to disclose numerous points of information. One of the most important is your income; not only how much you earn on a monthly or annual basis, but also where that money comes from. Knowing the source of income is, in some ways, just as important as knowing the amount, as it can tell lenders the stability and history of someone’s earnings, and indicate how likely these earnings are expected to last.
Because earnings from the cannabis industry can be labeled as illegal according to federal law, your wages from a legal dispensary could be ineligible for any loans supported by the federal government, such as FHA loans or USDA loans.
At the broader level, there is also a degree of uncertainty with the cannabis industry. Yes, all signs are indicating a steady and sometimes rapid growth in the industry, but there is also the chance (however remote) that the industry could be stifled by anti-pot legislation. If the federal government decides to throw its weight against the marijuana industry, all of the changes we’ve seen in the past decade could be toppled. This uncertainty makes many lenders, banks, and financing institutions more nervous, and when lenders get nervous, they usually stop the flow of cash or increase rates to compensate for perceived risk.
Tips for Getting a Mortgage Loan While Working in the Marijuana Industry
If you work in the industry, you might assume that getting a loan would be nearly impossible, but that’s not at all the case, as you have plenty of options available. We won’t say that getting the loan you need is easy, as there are still challenges involved, but you may find that it’s less difficult than you thought.
First of all, you should speak with multiple loan agents and lending institutions to learn about your options. Quite frankly, regulations on lending and marijuana are changing constantly, so you should be fully informed and up-to-date on your current options. Talking with multiple lending institutions helps you become fully informed, and also allows you to shop various options to find the right financing for your needs.
As you speak with loan agents and lenders, you will likely find that most, if not all, federally-supported loans are off limits. This means that FHA, USDA, and VA loans are all unavailable to the cannabis employee, so you’ll have to go with another route.
To increase your chances of mortgage approval, no matter what program you use, it will be best to save a large downpayment. Even if you can save as little as 3% for a loan, you will be on the right track. However, you may want to save as much as 10% if at all possible, as this will greatly increase your chances of mortgage approval.
Another helpful option is a cosigner. If you know someone who trusts your ability to repay a loan, and knows your marijuana income is steady and reliable, they may be willing to cosign on your loan. Don’t take this step lightly, however. If you default on the loan, you are placing the cosigner in serious financial trouble, so you should treat this step with the utmost caution and respect. Despite the risks, using a cosigner could open the doors to new lending options.
If you work in the cannabis industry and need a home loan, we have two options currently available:
Dedicated Support for Your Home Purchase
If you work in the marijuana industry and need an affordable, reliable mortgage loan, contact our staff today. We have the experience and knowledge to find the right financing for your purchase, and we’ll use a common-sense approach to lending to increase your chances of approval.
We strongly believe that owning a home is an important part of your financial stability, so let us help with your next home purchase!
