Marijuana Mortgages: A New Opportunity for California Borrowers
Mortgage lenders have long turned a blind eye to potential red flags when it comes to providing loans to individuals involved in illegal activities such as tax evasion, money laundering, and straw buying. However, a recent development in the mortgage industry is changing the game for legally licensed, self-employed individuals in California’s legal marijuana industry.
Last week, a wholesale mortgage lender in Encinitas announced that they are now accepting cannabis-related income to qualify for home loans. The terms are generous, with just a 10% down payment on a $2 million mortgage for primary residences. The rates may not be as low as traditional mortgages, starting at 4.6% for a 30-year mortgage with a five-year adjustable-rate lock. However, the ease of qualifying using 12 months of bank statement deposits makes it an attractive option for those in the marijuana industry.
The legal cannabis industry in California is booming, with taxable sales exceeding $1.3 billion in the second quarter of 2021. With over 12,000 licensed cannabis businesses in the state, the industry is projected to generate nearly $9 billion in sales by 2025. Despite the significant revenue generated by the legal marijuana industry, many individuals have struggled to secure traditional mortgages due to federal regulations and the stigma surrounding cannabis.
The decision by this wholesale mortgage lender to offer “marijuana mortgages” is a significant step towards providing financial opportunities for legal cannabis operators. However, the fact that only 40%-50% of California marijuana sales are transacted through legal operators highlights the need for federal laws to align with state sentiments on marijuana use.
As the mortgage industry continues to evolve, it will be interesting to see if more lenders follow suit and offer similar mortgage products for individuals in the legal marijuana industry. Ultimately, it is up to Congress to update federal laws and ensure that legal cannabis operators are not penalized or excluded from the mortgage market.