FAQs Cannabis Employees
If you are in the Cannabis space as a W-2 employee I can assist you in your home buying needs. Click here to learn more or contact me directly.
Frequently Asked Questions
A Cannabis employee may have some questions in regards to the home buying process. Here is a list of the most common questions people tend to ask. If you have other questions feel free to contact me directly…
Don’t let your job keep you from realizing the American Dream of homeownership.
Can a Cannabis Employee buy a home?
The short answer is, YES.
However, the question you should be asking is: “Can I use the money I make in the Cannabis industry to buy a home?” The answer to that question is “it depends”.
Most lenders will say NO to that question. However, there are very few lenders who will say YES to that question.
The main restriction with these few lenders is that you have to a W-2 employee, not an owner, of the company.
The down payment and interest rates are the same if your income came from a different source. And you will qualify just like any other FHA, VA, Freddie Mac, Fannie Mae or USDA borrower.
Call me today to get you started on the right path.
Do I need to open a bank account to buy a home?
In most cases, Yes you do need to open a bank account or have one already in existence. This is due to a number of reasons.
First is that monies that are being sent to the title company need to be done so in a secure manner. Title companies don’t typically take cash because the funds have to be traceable. This is often due to the Patriot Act since the horrific incident in 2001 in New York City.
The funds are usually sent via a wire transfer. This is to open escrow for the EMD (Earnest Money Deposit) and then a second time at closing to cover your down payment.
If you are being gifted the funds or someone else is buying the home for you on your behalf then you personally will not need to have a bank account.
What if I am the owner of a Cannabis business?
Unfortunately, the answer to that question is “No”. The residential home loans that I am aware of are only for W-2 employees. You cannot have any ownership of a Cannabis business in order to qualify for the loan.
How do I qualify for a residential home loan?
If you are buying a residential home through the use of your own income then you must have deposited those monies into a checking or savings account. You must deposit the full amount. The deposit must exactly match the pay stub you receive from your employer. This is particularly important if you are paid in cash with a matching stub.
The money deposited must match the stub in order to be counted. If it does not match for any reason then it is difficult to actually trace where that deposit came from. This is true even if it is off by $1.00. It must match to the penny.
What this means for you is that if you got paid $1,000 for working two weeks then you must deposit $1,000. At that time you can withdraw any cash you want to have on hand.
What kind of Down Payment do I need?
The Down Payment will be dependent on your credit as well as which loan program you will be qualified for a residential home purchase.
If you are an ex-Veteran then you can get into a home with 0% down.
If you are qualifying under an FHA loan then you will need approximately 3.5% as a down payment and another 1.5% to 2.0% for your closing costs. You can estimate about 5% down.
There is also Down Payment Assistant (DPAs) programs that you may be able to utilize as well. This will be fully dependent on your income, credit history, and a few other factors.
Give me a call today and I can put you in touch with a mortgage lender who will be able to answer this specific and unique questions based on your specific situation.
What interest rate should I expect?
Your interest rate will vary depending on a multitude of factors. Here are some things that will have an effect on the interest rate.
First, your credit scores. People with really good credit will have lower interest rates than someone with marginal credit.
Second, will be the type of loan you are getting. There is a difference between adjustable rate mortgages (interest rate can go up or down after a few years) and fixed-rate mortgages.
Also, the length of the loan can also have an effect on the interest payment.
Here is a link to check out today’s current mortgage interest rates.
Should I buy now or wait?
That is always going to be a personal judgment call. All real estate markets fluctuate over time. Purchase prices will go up in a Seller’s market. Those same prices will go down in a Buyer’s market. This is also seen in the stock market where you have Bull and Bear cycles.
There are a few things you must consider when deciding if you should buy now or wait.
- What are prices doing right now and does it look like it will go up or not? Determining if we are in a Bull or Seller’s market means that prices are going up because there are typically fewer sellers than buyers. This occurs when inventory is low and there is a lot of demand for housing. In a Bear market or Buyer’s market means there is a lot of inventory and buyers can be a lot more selective. They also can offer less than what a seller is asking and many times will get the home under contract.
- What are the interest rates doing now and expect to do in the future? If interest rates go up even by 25 basis points (0.25%) will mean you will be paying more each month for the same dollar amount borrowed. Sometimes this will mean you will only qualify for a lower dollar amount of a home.
- If you are in it for the long haul then market fluctuations don’t really matter very much. If you plan on staying in a home 10 or more years then home prices typically will go up over larger stretches of time.
Other factors to consider are what are the rental rates doing in comparison to mortgage payments. If you could be paying less on a mortgage payment than a rental then you are actually saving money. The amount of principal reduction and the tax savings on the interest rates can be huge over time. Not to consider the pride of homeownership and other benefits of owning versus renting.
How long does it take to buy a home?
Assuming you have all of your documents already in order and are pre-approved, it can take 30 – 45 days to close on a home if you are getting bank financing. Most of this is done on the bank’s side to get loan approval through underwriting.
You will have some time at the time of someone accepting your offer called the due diligence period. This is the time where you will be able to have your inspections done. You can back out and receive your earnest money deposit back with no questions asked.
Here is my first article that I wrote for this site geared toward the Buyer.
Can I open a bank account, legally?
That is a question that depends upon the bank. The federal government still classifies marijuana as a Class-1 substance. Opening a bank account at most banks has to follow federal regulations.
Even if medical marijuana or even recreational and medical marijuana is legal on the state level, it is not legal on the federal level. Since most banks are FDIC insured they cannot allow banking on something that is still considered an illegal federally. If they did then the bank could be exposed to a significant legal, operational and regulatory risk. Thus, they could get in trouble with your accounts. The government sees this as a potential for money laundering.
How much of a home can I buy?
To determine “how much” is a question that has many variables. Typically, just like a rental property, you must be able to stay within 30% of your income to cover your home purchase expenses. This will include the mortgage payment (covering both interest and principal reduction), property taxes, home owner’s insurance, and HOA payments.
Also, are there any other income coming into your household? This may be your second job (a.k.a. “side hustle”) and any other income coming from a spouse or other people that are purchasing the home with you.
The best answer is to contact me so I can put you into contact with a mortgage lender who can determine your purchase price based upon your unique situation.
What is the first thing I need to do?
When buying a home the first thing is to talk with a mortgage specialist. Call me to put you into contact with someone first.
However, you will need to have a few things at your disposal to get started. Every buyer’s profile is different, though.
Some of the basic things you will need are tax returns from the past two years. I am assuming you have been in the same job industry for at least two years. This can be anything from management, security or even a budtender (Cannabis employee). Two-year job history is a must.
You may also need bank statements for at least the past two months. This can indicate what your cash flow is.
When you speak with a mortgage professional they will have you fill out a Loan Application (a.k.a. a 10-03). Once you have spoken with them then he/she will issue you a Pre-approval letter. This pre-approval letter will state what is the maximum amount of home you can buy.
At the time of receiving this pre-approval letter then I can start the process of finding you that perfect home.
How long must I do a deposit into my bank account?
If you have a bank account at 3 or more months you must do this at a minimum of 2 months plus the time it takes to go through the entire escrow process.
If you just opened a bank account to start this process then it is best not to start putting in offers until at least the 3-month mark. At the 2-month mark will raise some flags with underwriting (the process of approving your loan) which may cause your loan to not be approved.
Can I use a “Gift” from someone to help with my EMD or other costs?
Your EMD or Earnest Money Deposit can be a “gift” to you. In fact, the entire purchase of the home could be gifted to you. There is no restriction as far as how much money someone else gives to you.
This gift can also be used to cover closing costs, down payment, and any other part of a residential real estate transaction.
As a Budtender can I use my tips to qualify?
As with anyone who is in the industry of receiving cash tips (e.g., servers, bartenders, valet, Uber drivers), you can use these tips to help you qualify. But, to use those tips you must report those tips on your tax returns. You will be paying tax on these additional sources of income.