How to get a mortgage working in the cannabis industry

If you work for a state-legalized marijuana business, getting a mortgage can be challenging. Many lenders don't count cannabis income, which leads to mortgage application rejections.

Here's the good news: NewCastle Home Loans counts cannabis income.

Employees of state-legalized marijuana businesses in Illinois and Florida can qualify for conventional home loans. You can get approved with the same low rates and down payments as other borrowers.

In this article, I'll explain how you can secure a mortgage and buy a home confidently while working in the cannabis industry.

Why do mortgage lenders reject cannabis income?

Most banks and mortgage lenders reject cannabis income because marijuana is a Schedule I controlled substance at the federal level.

Even though some states have legalized cannabis for medical or recreational use, it remains illegal federally. The conflicting legal status of cannabis creates uncertainty for federally regulated lenders, leading them to avoid cannabis-related income.

When lenders exclude cannabis income, it affects your ability to qualify for a mortgage. Without counting your entire income, your debt-to-income ratio increases, which limits how much you can borrow. A smaller loan can make finding a home that fits your needs and budget harder.

At NewCastle Home Loans, we count cannabis income and offer mortgage options to employees of state-legalized marijuana businesses in Illinois and Florida. Like any other home buyer, you can get approved for a mortgage at a competitive rate and with a low down payment.

What kind of mortgage can I get with cannabis income?

A conventional mortgage is the best option for someone with cannabis income because some conventional loan programs allow lenders to include cannabis-related earnings in the approval process.

However, most lenders do not accept cannabis income because it remains illegal under federal law. Lenders worry about the potential legal or financial risks of counting federally unlawful income. These risks include challenges with investors, regulatory scrutiny, and difficulty selling mortgages on the secondary market.

Buying a home while employed in the cannabis industry can be tricky. If one lender deems your income ineligible, it doesn't mean every lender will. Different lenders have varying criteria, and some are more familiar with cannabis-related income and have a greater willingness to work with individuals in the industry.

You're in the right place for a cannabis mortgage.   

Illinois and Florida cannabis industry workers can buy a house with only 3% down, and get the same low interest rate we offer all our customers. 

Find out how much buying a home will cost. Check today's mortgage rates, monthly payments, and closing costs.

Can I get an FHA, VA, or USDA mortgage if I work for a state-legalized marijuana business?

Most homebuyers cannot qualify for FHA, VA, or USDA mortgages if their primary income comes from a state-legalized marijuana business.

The federal agencies that back these loans consider cannabis income ineligible due to marijuana's classification as a Schedule I controlled substance under federal law. These agencies require lenders to exclude ineligible income, like cannabis earnings.

The following government-backed loans don't count cannabis-related earnings:

• FHA loans: Insured by the Federal Housing Administration, designed for buyers with lower credit scores or smaller down payments
• VA loans: Guaranteed by the Department of Veterans Affairs, available to eligible veterans and military members. See "The VA Home Loan and Marijuana-Derived Income."
• USDA loans: Backed by the U.S. Department of Agriculture for buyers in rural areas with moderate-to-low income

Marijuana's federal classification is a barrier for some homebuyers. It limits access to government-backed mortgages designed for first-time buyers with low down payments and credit scores. Without FHA, VA, or USDA loan options, you may need a larger down payment and a higher credit score for a conventional loan. 

Can I get a mortgage if I'm self-employed with an ownership interest in a cannabis business?

Having an ownership interest in a state-legalized marijuana business complicates the mortgage approval process. 

Most lenders approving conventional mortgages for cannabis business employees deny cannabis business owners. The self-employed are typically ineligible, even when they can afford the monthly payments on a salary—without self-employment income.

When applying for a mortgage, be honest about your employment in the cannabis industry and provide all necessary documentation related to your income upfront. Mortgage lenders typically check your IRS tax transcripts before closing to determine whether you are self-employed.

NewCastle Home Loans will use cannabis income to approve your mortgage application when you:

• Buy or refinance a property in Illinois or Florida
• Report it on a W-2 or 1099 tax form
• Have no ownership stake in the cannabis business

Unfortunately, you have fewer mortgage options when you are self-employed in the cannabis industry. If you're self-employed, check with specialized lenders, state banks, and local credit unions for loan options. Schedule a call with a home loan expert at NewCastle Home Loans. 

What are the requirements for a cannabis mortgage?

There are standard requirements that people working in the cannabis industry must meet to qualify for a conventional mortgage. First, ensure that you meet the following criteria:

Credit score: The minimum credit score is 620.

Property type: The property must be a single-family, townhome, condominium, or 2-to-4-unit.

Down payment: The minimum down payment is 3% of the property's purchase price.

Loan amounts: We offer mortgages from $150,00 to $806,500 for a single-family, townhome, or condominium, and larger loans for 2-to-4-unit properties. See the current loan limits. 

Prove your income is from a state-legalized marijuana business: Provide recent paystubs and W-2 statements confirming you can repay the loan. You cannot have an ownership stake in the cannabis business.

Verify you have enough cash to close: Please send a bank statement, gift letter, or other documents showing that you can afford the down payment and closing costs.

Remember, NewCastle Home Loans currently lends to cannabis workers in Illinois and Florida.

Get approved for a cannabis mortgage, step-by-step.

When you get pre-approved by NewCastle Home Loans, one of our loan decision-makers verifies your financial information up-front. This way, you feel confident about buying a home.

Follow our 3-step plan to get approved for a cannabis mortgage.

1. Apply online: Check credit, upload income documents, and import bank statements.
2. Get your pre-approval letter: We verify your financial information the same day and send you a verified mortgage pre-approval letter confirming that you're ready to buy.
3. Close in 2 weeks: Make an offer to buy the perfect home. After the seller accepts your offer, get ready to close.

Buying the perfect home starts with a verified mortgage pre-approval. Get yours today so you know what to expect.

• How a mortgage credit check affects your score
• Why a verified mortgage pre-approval is better

What if the bank denies my mortgage because of my cannabis income?

If a mortgage lender denies your application due to cannabis income, here are three steps you can take:

1. Add a co-signer: A co-signer applies for a mortgage with you but won't live in the home. A co-signer with a more traditional income can give you the boost you need to get approved for a mortgage.
2. Find a different property: Adjust your expectations and consider a less expensive property that aligns better with your financial situation.
3. Talk to a cannabis-friendly lender: NewCastle Home Loans has helped hundreds in the cannabis industry buy homes. 

Laws and regulations surrounding cannabis are evolving. Guidelines for government-backed loans and income from the cannabis industry could change soon. Feel free to comment on this topic below.