Mortgage Options for Cannabis Dispensary Owners & Employees

Close-up of green cannabis plant

The legal cannabis industry continues to grow in Colorado and throughout the U.S. In fact, according to a recent press release from Grand View Research, the market is expected to reach $66 billion by 2025. That means hundreds of thousands of dispensary workers will be looking to obtain home loans in the next few years.

Until recently, those in the industry have had trouble getting approved for a mortgage. It makes sense when you think about it — while marijuana is legal in a number of states, it remains fully illegal at a federal level. When you consider that residential mortgages are federally backed loans, you can see why cannabis dispensary owners and employees often have to jump through multiple hoops to become homeowners.

So how can you qualify for a mortgage if you work in the marijuana industry? Keep reading as we discuss home loan restrictions, alternative financing options, and tips for choosing the right mortgage for your needs.

Why you may have trouble getting a mortgage

Let’s say you start the mortgage conversation with a lender. One of the first things they will ask about is your income. Even if you make enough money to purchase a million-dollar home, your lender will want to know how much you earn on an annual basis as well as the source of that income. This additional information provides further insight into the stability and history of your earnings.

As aforementioned, the issue with earnings from the cannabis industry is that they can be deemed illegal according to federal law. This essentially makes you ineligible for loans supported by the feds, such as FHA, VA, and USDA loans. There’s also the chance that those at the top will see the industry as risky for years to come, despite its steady growth.

Such uncertainty has a trickle-down effect on traditional financing institutions and lenders. If you applied for a mortgage even just a year or two ago as a worker in the industry, chances are your lender would’ve viewed your income as “unconventional” and, in turn, rejected your application.

Your home loan options

Just because you may work in the marijuana industry doesn’t mean you have to put your goal of owning a home on hold. Before getting too far into the process, talk with several lenders to learn about your options. With lending regulations constantly changing, you may be told about a mortgage program that’s perfect for your situation.

Our best advice for marijuana dispensary employees trying to qualify for a home loan is to save a large down payment. The more you can pay upfront, the less of a risk your lender will have to take. Ideally, borrowers in the industry should save between 10-20% for a down payment. Some financial institutions, however, approve borrowers with much less saved.

The other option worth considering is a co-signer. If you have a loved one who knows your income is reliable, feels confident about your ability to repay a loan, and wants to help you get approved for a mortgage, see if they would be comfortable co-signing your loan. Just keep in mind that if you move forward with a co-signer and you default on your loan at any time, both of you could be in serious financial trouble. A co-signer should be your last resort when applying for a home.

Mortgage requirements for borrowers in the marijuana industry

As a cannabis dispensary owner or employee, here are three things you must prove to your lender when applying for a mortgage.

Must be in a state where marijuana is legal

This one’s pretty self-explanatory. As of December 2019, 11 states have legalized marijuana for recreational use. Borrowers meet the first requirement for a mortgage if they live and work in one of these states.

Note that a residence is not eligible for delivery to Fannie Mae regardless of state law if the appraiser discovers any cultivation of marijuana on the property.

Must have a two-year history in the cannabis industry

This is a typical requirement for most borrowers, not just those in the marijuana industry. If you’re an employee, you must be a W-2 employee and be able to provide all financial records upon request. Self-employed borrowers, meanwhile, must adhere to the same two-year requirement and be able to show successful maintenance of a business.

Must be able to demonstrate income

Borrowers with cannabis income are eligible for a conventional loan product as long as they are W-2 wage earners and have no ownership interest. The key difference with an employee of a marijuana/cannabis-based business is that this borrower’s income must be verified in accordance with the Selling Guide requirements. According to Fannie Mae, no further investigation into the legalities of the business which employes the borrower is required. 

Now, perhaps you have either full or partial ownership of a marijuana-based business. Should you attempt to use proceeds from the business as funds for the transaction (down payment, closing costs, etc.) or if income from the business is used in qualifying for the loan, the loan is not eligible for sale to Fannie Mae.

Start the conversation with a lender

Have more questions about your mortgage options as a marijuana dispensary owner or employee? The right lender makes all the difference. Just be sure you work with one who has your best interest in mind.

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