Can we get a home loan when my partner works in the marijuana industry?
August 29, 2016 1:26 PM   Subscribe

My partner is employed by the management company that oversees the operations of a (legally operating) medical marijuana facility in a city in CA that allows and regulates it. We have been turned down for a home loan that we would otherwise qualify for easily, because his job is illegal in the eyes of the federal government. Is this a lost cause or might there be some lender who won't care about this?
posted by tumbleweedjack to Work & Money (12 answers total) 1 user marked this as a favorite
 
Maybe local credit unions?
posted by joan_holloway at 1:30 PM on August 29, 2016


Can you get a loan based on your income and credit alone? We have friends who did that recently. You might try seeing what you might be able to qualify for.

Outside of that - what financial institutions does your partner's business work with? I'd start with talking to them, and also go to local credit unions or banks that only work in your state. The tension here is that a lot of institutions that would like to make loans to you can't because they don't want to risk any blowback. There are a few lenders and venture capitalist groups that specialize in pot startups, but that would put a huge crimp in what you're trying to do. Good luck!
posted by arnicae at 1:32 PM on August 29, 2016


There are banks that are figuring out ways of working with the marijuana industry while also complying with federal regulations. This episode of Planet Money from last year talks about some of what's involved. For example, your partner's employer probably has dealings with such a bank which is likely listed on his paystubs. I would start there and see if they offer mortgages.

You may be hosed if you wanted to take advantage of any federal mortgage subsidy programs, however (think FHA, VA home loan, etc.)
posted by sparklemotion at 1:32 PM on August 29, 2016 [2 favorites]


Response by poster: His business is currently operating as cash only because they can't get banking services (they still pay taxes- they go to city hall with wads of cash to pay it). Our loan was not federally subsidized in any way as we are putting 20% down, so at least that's not a concern.

I'll look into credit unions and listen to that podcast for now, but if anyone else has any ideas (or 500k to lend two very reliable young men), I'm all ears.
posted by tumbleweedjack at 2:16 PM on August 29, 2016


Yeah, its a serious problem for all involved.

Disregarding the federal legality of Cannabis, the banks thing is that they want proof of income. If your husband is filing personal taxes, see if you can try to approach it from that angle rather than from (cash) paystubs.

The legal/regulated Cannabis industry has issues with banking, but if the federal government accepts legally paid federal taxes, then the money earned on which the taxes were paid should ought to be considered kosher.

Regarding Credit Uninions - no, to date there are no legitimate credit unions in CA that is taking Cannabis industry money. There was (?) talk about a bank in WA and the possibility of Indian Bands opening up credit unions, but it is currently unresolved.
posted by porpoise at 2:29 PM on August 29, 2016 [3 favorites]


Most lenders aren't going to google the company name and find out what they actually do. If he has an innocuous job title, and an innocuous company name, it would probably slip under the radar. Of course the real problem here is that his employer is probably not filing proper W-2s that the bank can use to verify income, and there's not a good way around that other than getting a different job.
posted by miyabo at 3:03 PM on August 29, 2016 [1 favorite]


How does he get paid?

As long as he can provide a recent pay-stub and the two most recent year's W-2's, you should have no problem documenting his income. I think 1099's would work okay too.

If neither of those are an option but the income does get legally reported on his Federal tax returns somehow, it's also no problem. If the income get's reported on state taxes but not Federal, you can probably get a bank to make an exception.

Worst case, I think two or three year's worth of pay-stubs or even copies of checks from deposits would work.

Basically, as long as he isn't getting paid in straight cash that or weed or something and can document stable income and stable employment, he'll be fine.

I am A banker, I am not YOUR banker.
posted by VTX at 7:16 PM on August 29, 2016 [1 favorite]


Why aren't his tax returns good enough as proof of income? I don't have a W-2 job or get pay stubs either and that is how I would prove my income to a bank. If the feds had no problem with taking his tax money then surely the returns that say his income on it are good enough for proof? This is how everyone with a non-W2 job gets a loan.

Unless you're saying he gets paid in cash, so he doesn't file taxes... that would certainly be a problem.
posted by bradbane at 7:21 PM on August 29, 2016


You might look for a place that specializes in what are called "portfolio mortgages." Portfolio mortgages are made in situations where assessing the value of the collateral property is difficult due to there being few or no substantially similar pieces of real estate to compare the subject property to. (People buying houseboats, for instance, often have to get financing through portfolio lenders. I've also heard of a person who had to use a portfolio lender when he bought an old-school rooming house.)

Though you seem to be in the converse situation [wherein you're (presumably) interested in a relatively normal piece of residential real estate, but you yourselves are atypical borrowers] I think that maybe a portfolio lender, being accustomed to dealing with atypical situations and finding workarounds for the standard equations, might be more likely to accommodate you.

Seattle, where I live, has exactly one major portfolio lender for residential properties-- and portfolio loans are pretty much all they do, though they make them in commercial and construction contexts as well. Your region may have a similar situation.
posted by palmcorder_yajna at 7:38 PM on August 29, 2016


Response by poster: To clarify: He has a W2, he pays taxes, but he gets paid in cash because his employer doesn't have a bank. This is probably why the lender found out about the nature of his employment to begin with- they were questioning why his income was all deposited as cash, and the address of the management company is the same as the address for the dispensary.

We're actually very typical borrowers with typical jobs- he's on the accounting end of things, not exactly a taste-tester, you know?

We've put out feelers with some friends of friends who are brokers, and early indications are that our scenario is not a deal-breaker, it just needs further scrutiny. I'll keep you posted.
posted by tumbleweedjack at 7:43 PM on August 29, 2016


If his employer can whip up one or two hand written ay vouchers with accurate information on them, you should be able to use those instead of pay-stubs and since you have W-2's, you should be good to go.
posted by VTX at 5:29 AM on August 30, 2016


I'd suggest trying a mortgage broker in your area. Free to talk to them.
posted by osi at 7:02 AM on August 30, 2016


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