POT TALK: LENDABLE INCOME OR NOT

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For a very long time, although people could legally work in the pot industry in states where pot had been legalized, those working in the pot industry have not been able to use their income to qualify for a mortgage. Why is that some may ask? Most banks and mortgage companies are federally insured and/or they provide federally insured mortgage products which precludes them from doing so to an industry that is still considered to be illegal by the Federal Government.

W-2 employees, not owners, now have options!

USDA has issued a written response that they will accept W-2 income for those working in the pot industry provided they are doing so in a state where pot has been legalized.

CONVENTIONAL LOANS
Although there is no written response from Fannie Mae, there are enough documented conversations with Lenders and mortgage insurance companies, that if pot is legal in that state, then there is “high” confidence that lending will be allowed to W-2 employees. Mortgage insurance companies have provided written responses stating that they will insure within those states where pot is legal.

FHA/VA
Here is where things get really tricky! The unknown has always been “is the income legally derived”? The State says “yes”, the Federal Government says “no”. Interestingly enough, the IRS is happy to collect taxes on such income even though they are a Federal Agency…… FHA/VA have not put their position in writing and as of right now, I’m not aware of any Lenders doing FHA or VA loans to those with income derived from a pot shop.

Regardless of the stance above, there remain investors who will not lend to anyone working in this industry so check with your Lender to be sure they can assist you before you get too far into the process.

Further discussion to come!

#mortgagesbymichelle #practicaltipstuesday

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