As state after state moves toward the legalization of marijuana, cannabis professionals may find themselves in a tough spot when it's time to buy a home. Because marijuana is currently legalized at the state level, it can be challenging for cannabis workers to get approved for a mortgage, even though the marijuana industry is booming.
Many mortgage lenders and big banks aren’t comfortable lending to those with cannabis-industry income. Even though your income is perfectly legal in some states, the federal classification of marijuana prevents you from receiving federally backed loans. This narrows your path to homeownership and, sadly, can send some lenders running.
Headquartered in Chicago, NewCastle is committed to improving mortgage access to those working in the cannabis space. We get it—would-be homebuyers are losing out on financing options. While other lenders may not be willing to go the extra mile, we’ve created a path for cannabis workers to get approved for the home loan they need.
Our team has compiled this quick guide to walk you through the mortgage basics for those with cannabis-industry income. Check out the guide below to learn more, then fill out an application or schedule a call to get started on your mortgage:
- Understand the mortgages you’re eligible for.
- Make sure you can qualify for a home loan.
- Apply for a mortgage with a lender like NewCastle.
- If you’re not ready to apply, get your questions answered.
1. Understand the mortgages you’re eligible for.
There are several different mortgage products that homebuyers can apply for, and they fall into two broad categories: government-backed mortgages and conventional mortgages. Generally, if you receive income from a cannabis-industry job, you’re more likely to be approved for a conventional mortgage.
Government-backed loans have stricter limitations, including limitations on what qualifies as an acceptable source of income when qualifying you for your loan. Because conventional mortgages aren’t backed by the U.S. government, acceptable income sources aren’t nearly as limited when you apply.
With conventional mortgages, approving borrowers with marijuana-related income is up to each lender. Unfortunately, most lenders, especially banks that follow federal regulations, consider this type of income to be too "risky." As a result, they're more inclined to deny your application based on the source of your income rather than go against federal money-laundering laws.
At NewCastle, our team takes the time to verify your income and review your application materials thoroughly. You’re not just filtered through an automatic program; we’re able to verify legitimate income from cannabis professionals because there’s a team member dedicated to working with you from the start. The flexibility of conventional loans allows us to approve borrowers who might otherwise have a hard time getting approved..
And while it’s true that federally backed loans are known for their affordability, the good news is that conventional mortgages can still have some great perks. You can get a loan with a down payment of just 3% and still qualify for a great interest rate, keeping your monthly payments low. If you can meet a few cannabis-income specific requirements, we’re ready to help you get approved.
Legalization is one of the biggest roadblocks for cannabis workers applying for a mortgage. Because marijuana isn’t federally legal, government-backed mortgages—FHA, VA, or USDA mortgages—can’t approve loan applications that rely on cannabis-related income.
So while you’re not technically ineligible from getting an FHA mortgage, for example, if you work in the cannabis industry, you can’t use your cannabis-related income to qualify for the loan. For most borrowers, excluding this income from your application will mean that you don’t bring in enough money each month to qualify for the loan.
If your situation requires that you only apply for federally backed loans, there are a couple of workarounds. In order to make sure your income won’t prevent you from being approved, consider additional income sources to include on your application:
- Income from a different job outside of the cannabis industry.
- Income from a co-borrower, like your spouse or partner.
- Income from a cosigner: a relative who applies for the mortgage with you, but won’t live in the home.
Without one (or more) of these additional income sources, most cannabis professionals will be better off applying for a conventional loan.
2. Make sure you can qualify for a home loan.
There are standard requirements that everyone must meet in order to qualify for a conventional mortgage. Making sure you meet these requirements is one of the first steps to make sure you can afford to buy a home:
- Have a credit score of at least 620.
- Provide proof of employment, income, and that you can afford to repay the loan.
- Have money ready for a down payment of 3% or more, along with proof that the money you’re using comes from an acceptable source.
- Prove that you’re buying an acceptable property—a single-family home, townhome, condo, or 2- to 4-unit home.
- Apply for a loan amount not exceeding $647,200.
These basic qualification guidelines are what allows us at NewCastle feel confident to lend you the money for your conventional home loan. Because you work in a slightly tricky industry, you’ll also need to meet a few additional requirements specific to cannabis workers:
- Buy a home in Illinois, Michigan, or Florida, where marijuana is legalized. We lend exclusively to cannabis workers in these three states.
- Not have an ownership interest in a cannabis business. We can accept income from workers in the cannabis industry, as long as that income is not tied to full or partial ownership.
- Provide proof of income from a reputable cannabis business. Unfortunately, we cannot use self-employment income for those working in the cannabis space.
- Apply for a loan of $150,000 or more, and use it to purchase a non-manufactured home.
- Buy your home for personal use. The property you buy can’t produce income for any reason.
If you meet this basic requirements, then you’ve got the green light to apply!
3. Apply for your mortgage with a lender like NewCastle.
As a cannabis professional, you need a more personal approach to your mortgage. That’s why we’re dedicated to doing things a little differently. Through our streamlined, web-optimized process, cannabis workers can be approved for a home loan in 1 day and close within 10 days.
Ready to start, but not sure what your next steps are? You’ve got a couple options, and it all depends on where you are in your home-buying process.
If you’ve found a home to buy and just need a loan to close the deal, go ahead and apply now. You don’t want to lose out on the perfect home, and it’s better to maximize the amount of time we have to close your loan.
If you’re ready to buy but want to make sure you’ll be approved first, we get it. That’s a smart way to make sure your home-buying process goes smoothly. Apply for pre-approval and our team will review your materials and pre-approve you for a loan amount specific to your finances. Once you’re pre-approved, we’ll write you a detailed pre-approval letter that you can share with your real estate agent. Having this letter as part of your offer will let the seller know that you’re serious about your offer, that you can be approved for the loan, and that you’ll close quickly.
So—what’s next for you?
4. Get your questions answered.
At NewCastle, we’ve got the industry knowledge and experience to help you close on your home in record time, even if other lenders might turn you down. We’re proud to lend to customers in the cannabis industry, providing stellar service, lower rates, fewer fees, and lower monthly payments.
Still have questions? Schedule a call with one of our loan experts today. Let’s get you moving toward your homeownership goals.