Does your lender need a licence in your state?

"Do you need a licence to be a hard money lender?" is one of the most asked and most confidently mis-answered questions in this category. The answer is not one answer. It is three questions, and the wrong one gets asked constantly.

1. Which state is the property in? Not where you live, not where the lender is based. The collateral's state governs.
2. Is the loan business purpose or consumer purpose? The single biggest fork. Business-purpose loans against investment property are exempt from much consumer mortgage licensing in many states. A loan secured by the borrower's own home generally is not - see owner-occupied hard money.
3. Is a broker involved? Brokering is separately licensed in many states even where lending is not, and in a couple of states a licensed broker arranging the loan is itself the exemption.

The states where it is settled

Licence required, all property types

A licence is required to make these loans in this state even when the loan is business purpose and secured by investment property. This is the group where an unlicensed lender is a straightforward problem.

• Arizona — Also expects a physical in-state office and a qualifying employee with mortgage origination experience.
• California — Either a California Financing Law (CFL) licence from DFPI or a DRE real estate broker licence. Applies even to business-purpose loans. CFL licensing has run 10-12 months.
• Delaware — Delaware catches people out because it is a favourite state to form an entity in. 5 Del. C. §2202(a) requires that "every person desiring to transact the business of lending money in this State shall be required to obtain a license" - with no personal, family or household purpose test anywhere in the chapter. The safe harbour is volume, not purpose: a person making not more than five loans in any twelve-month period is deemed not to be transacting the business of lending money. Loans made by an unlicensed lender fall under chapter 23 of title 6. The Commissioner also has power to exempt classes of loans under §2202(b), so an exemption is something to obtain in writing rather than assume.
• Nevada — Expects a physical office and an experienced on-site employee, and conducts randomised audits.
• North Dakota — Expects documented internal policies and procedures.
• Rhode Island — Rhode Island licenses lenders through a definition that carries no purpose test. Under §19-14-1 a "loan" is "any advance of money or credit including, but not limited to" loans secured by mortgages, and a "lender" is any person who makes or funds a loan in the state with their own funds. The purpose test that carries you elsewhere appears in the separate definition of a residential mortgage loan, which is used for originator licensing - it does not narrow the lender licensing chapter. Treat Rhode Island as a state where you confirm the position in writing before lending.
• South Dakota — Expects documented internal policies and procedures.
• Vermont — Expects documented internal policies and procedures.

Licence required for 1-4 unit residential

A licence is required where the collateral is one-to-four-unit residential property, even as an investment. Lending against larger or purely commercial collateral may sit outside it.

• Hawaii — Hawaii is a collateral-only state, like Minnesota. HRS §454F-1 defines a residential mortgage loan as one secured by a first or subordinate lien on Hawaii residential real property with a structure designed principally for occupancy by one to four families, including condominium and cooperative units - with no requirement that the loan be for personal, family or household use. The business-purpose argument does not narrow this one. Note also that it reaches subordinate liens, not just firsts. Hawaii exempts a seller transacting three or fewer such loans in a calendar year.
• Idaho — Exemption available where a licensed broker arranges the loan.
• Minnesota — Minnesota is the trap in this group. Minn. Stat. §58.02 subd. 18 defines a residential mortgage loan purely by the collateral - a loan secured primarily by a mortgage or equivalent security interest on residential real estate - with no requirement that the loan be for personal, family or household purposes. The business-purpose reasoning that carries you in most states does not work here, because the statute never asks what the money is for. Minnesota does exempt a person not in the business of making these loans who makes no more than three of them with their own funds in any twelve-month period (§58.04), which is a volume exemption rather than a purpose one.
• Oregon — Applies to residential investment property. Exemption available where a licensed broker arranges the loan.
• Utah — Requires a Principal Lending Manager licence - an individual licence tied to the company - for residential property.

Registration required

No lending licence as such, but the entity must be registered with the state before it does business there.

• North Carolina — No lending licence identified, but registration with the Secretary of State is required.

Depends on borrower and collateral

The answer turns on whether the borrower is an individual or an entity and on how the property is classified. Ask the regulator about your specific structure.

• Alabama — Alabama does not use the purpose test that most states do. Ala. Code §5-25-2 defines a mortgage loan as a loan made to a natural person secured by a lien on single-family to four-family residential property in Alabama - with no requirement that the loan be for personal, family or household use. As in Virginia, the escape is the borrower rather than the purpose: lending to an entity is outside the definition. Note also that chapter 25 is the Mortgage Brokers Licensing Act, so whether a lender using its own funds is captured is a separate question worth putting to the Banking Department in writing.
• Florida — Requirements differ depending on whether the borrower is an individual or an entity and how the property is classified.
• Virginia — Virginia runs against the national pattern and it catches people out. Va. Code §6.2-1600 defines a "mortgage loan" as a loan made to an individual primarily for personal, family or household purposes secured by one-to-four-family residential property. The regulation at 10VAC5-160-10 then says those purposes include a loan used to buy a dwelling that will be rehabilitated for resale to people who will live in it, or leased to people who will live in it. In other words Virginia pulls ordinary fix-and-flip and buy-to-rent lending into the consumer definition rather than out of it. The escape is the borrower, not the purpose: the definition reaches loans to an individual, and the statute excludes property of more than four units and property used for commercial or agricultural purposes. Do not assume a business-purpose affidavit solves this one.

Business-purpose lending sits outside the licensing statute

The state's mortgage licensing statute is keyed to loans made primarily for personal, family or household use. A genuine business-purpose loan to an entity, secured by investment property, falls outside that definition, which is why unlicensed private lenders operate lawfully here. Two cautions: the business-purpose characterisation has to be real rather than a label on the paperwork, and lending to a natural person for personal use is licensed. Other statutes - usury, broker licensing, servicing - can still apply.

• Alaska — Alaska Stat. §06.60.990 defines a residential mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling or Alaska residential real estate, so business-purpose investment lending is outside the Mortgage Lending Regulation Act.
• Arkansas — Ark. Code §23-39-502 defines a mortgage loan as a loan "primarily for personal, family, or household use" secured by a dwelling. Arkansas licenses through the Securities Commissioner rather than a banking department, which is unusual and worth knowing when you go looking for the licensee register.
• Colorado — C.R.S. §12-10-702(21) defines a residential mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling of four or fewer units, so an investment loan sits outside it. Note that Colorado is also the state that opted out of DIDMCA section 521 a second time in 2023; that is a separate question about banks exporting rates, and it was preliminarily enjoined in June 2024.
• Connecticut — Conn. Gen. Stat. §36a-485 defines a residential mortgage loan as one "primarily for personal, family or household use" secured by a dwelling. Connecticut also exempts a person making five or fewer residential mortgage loans in any twelve consecutive months (§36a-487) - a volume exemption that sits on top of the purpose test.
• District of Columbia — D.C. Code §26-1101(12) defines a mortgage loan as any loan "primarily for personal, family, or household use" secured by a dwelling. A separate definition of residential real property, which had turned on owner-occupancy, was repealed by D.C. Law 18-38 in 2009, so the purpose test is what governs today.
• Georgia — The Georgia Residential Mortgage Act reaches loans "primarily for personal, family, or household use" secured by a dwelling (Ga. Code §7-1-1000). A genuine business-purpose investment loan falls outside it.
• Illinois — 205 ILCS 635/1-4 defines a residential mortgage loan as "any loan primarily for personal, family, or household use" secured by a dwelling. Separately, the Residential Mortgage License Act's licensing provisions do not apply to an entity engaged solely in commercial mortgage lending - note the word solely, which is a narrower exemption than it first looks for a lender that also writes consumer paper.
• Indiana — Ind. Code §24-4.4-1-301 defines a first lien mortgage transaction as credit used by the debtor primarily for personal, family, or household purposes secured by a first lien on a dwelling. A business-purpose loan is outside it. Note the article covers first lien lending specifically; junior-lien lending is governed elsewhere in the Indiana code.
• Iowa — Iowa gets there through occupancy and volume rather than purpose. Chapter 535B applies to loans on "residential real property", which Iowa Code §535B.1 defines as an owner-occupied single-family or two-family dwelling. Two things follow: a non-owner-occupied investment property is outside it, and the collateral test stops at two units rather than four. Separately, the mortgage banker definition only bites at four or more such loans in a calendar year. Iowa is also the one state that never opted back in to DIDMCA section 521, which is a different question about banks - see the federal section below.
• Kansas — Kansas reaches the usual result by an unusual route. K.S.A. §9-2201 defines a mortgage loan as one made to one or more individuals secured by a lot intended for residential purposes or a one-to-four family dwelling occupied or intended to be occupied for residential purposes by the owner. The test is owner-occupancy and an individual borrower, not the purpose of the loan. A non-owner-occupied investment property is therefore outside it - but a live-in flip, where you occupy the property yourself, is not.
• Kentucky — KRS §286.8-010(15) defines a mortgage loan as any loan "primarily for personal, family, or household use" secured by residential real property. Note a Kentucky wrinkle: some exemption claims must be filed with and approved by the commissioner under §286.8-020 rather than simply assumed.
• Louisiana — La. R.S. §6:1083(24) defines a residential mortgage loan as any loan "primarily for personal, family, or household use" secured by a dwelling. The purpose test comes first in the definition, so business-purpose investment lending is outside the Residential Mortgage Lending Act.
• Maine — The Maine Consumer Credit Code defines a consumer loan at tit. 9-A §1-301 as one where the debtor is a person other than an organization and the debt is incurred primarily for a personal, family or household purpose. Both limbs have to be met, so a business-purpose loan to an LLC is outside the consumer definition. Maine is also one of the seven DIDMCA section 521 opt-out states - it opted out in 1981 and back in in 1995 - which is a separate question about banks.
• Maryland — Maryland exempts commercial-purpose loans, but it is the one state we have found that says in statute what the proof has to look like. Where a mortgage loan is made for a commercial purpose to an individual, Fin. Inst. §11-521 requires "independent evidence of commercial purpose" - and expressly provides that a borrower affidavit without supporting evidence does not count, except for a borrower funding a business not yet incorporated. If your Maryland lender is relying on a signed business-purpose affidavit and nothing else, that is the specific thing Maryland law says is not enough.
• Massachusetts — Mass. Gen. Laws c.255E §1 defines a "mortgage loan" as a loan to a natural person made primarily for personal, family or household purposes secured by a mortgage on residential property. Both halves matter: a loan to an entity is outside it, and so is a genuine business-purpose loan.
• Michigan — MCL 445.1651a reaches a loan secured by a first mortgage on a Michigan dwelling designed for four or fewer families - and then expressly provides that a mortgage loan does not include a loan transaction in which the proceeds are not used primarily for a personal, family, or household purpose. Two limits worth noting: the act is confined to first mortgages, and the collateral test is a one-to-four-family dwelling.
• Mississippi — Miss. Code §81-18-3 defines a residential mortgage loan as any loan "primarily for personal, family or household use" secured by a dwelling, so business-purpose investment lending is outside the S.A.F.E. Mortgage Act.
• Missouri — RSMo §443.703(30) defines a residential mortgage loan as "any loan primarily for personal, family, or household use" secured by a dwelling or residential real estate. The use test is part of the definition rather than an exemption bolted on afterwards, so a business-purpose investment loan does not become a residential mortgage loan merely because the collateral is a house.
• Montana — Mont. Code §32-9-103 defines a residential mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling or Montana residential real estate. Montana goes further than most and exempts, at §32-9-104, an entity engaged solely in commercial real estate lending - note the word solely, and note that Montana requires proof of exemption rather than a bare assertion.
• Nebraska — Neb. Rev. Stat. §45-702 defines a residential mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling. Nebraska is also one of the seven states that opted out of DIDMCA section 521, in 1982, opting back in in 1988 - a separate question about banks, covered in the federal section below.
• New Hampshire — N.H. RSA §397-A:1 defines a mortgage loan, first or second, as one "primarily for personal, family, or household use" secured by a dwelling or residential real estate. Business-purpose lending is outside chapter 397-A.
• New Jersey — N.J.S.A. 17:11C-53 defines a "residential mortgage loan" as one "primarily for personal, family, or household purposes" secured by a dwelling, so the Residential Mortgage Lending Act does not reach a genuine business-purpose loan.
• New Mexico — N.M. Stat. §58-21-2 defines a mortgage loan as any loan "primarily for personal, family or household use" secured by a dwelling, so business-purpose investment lending is outside the Mortgage Loan Company Act.
• New York — Banking Law §590(1)(a) defines a "mortgage loan" as a loan to a natural person made primarily for personal, family or household use and secured by residential real property. A business-purpose loan to an LLC is outside that definition, so article 12-D mortgage banker licensing does not reach it. Separate from licensing, New York's usury rules are among the tightest in the country - civil usury at 16% and criminal usury at 25% - with exemptions that turn on the borrower being an entity and the loan being business purpose. Get the structure reviewed by a New York attorney.
• Ohio — Ohio is the most explicit of any state we have sourced. A residential mortgage loan made to a borrower for the purpose of investing in a dwelling to lease, rent or resell for profit is a business-purpose loan and is not subject to the Residential Mortgage Lending Act - unless the borrower or an immediate family member will occupy the dwelling, or one unit of a two-to-four-unit property. That occupancy carve-out is the trap: put a family member in one unit of a duplex and the licensing rules come back.
• Oklahoma — Okla. Stat. tit. 59 §2095.2 defines a residential mortgage loan as one "primarily for personal, family or household use" secured by a dwelling, under the state SAFE Act. A business-purpose investment loan sits outside it.
• Pennsylvania — 7 Pa.C.S. §6102 defines a "mortgage loan" as a first or secondary mortgage loan, and defines both of those as loans made primarily for personal, family or household use. A business-purpose loan is outside the chapter by composition rather than by an express carve-out, so the reasoning is a step longer than Ohio's - worth confirming with the department for your structure.
• South Carolina — S.C. Code §37-22-110 defines a mortgage loan as one made to a natural person primarily for personal, family, or household use, secured against the borrower's dwelling. Both limbs exclude ordinary business-purpose investment lending to an entity.
• Tennessee — Tenn. Code §45-13-105 defines a residential mortgage loan as one "primarily for personal, family or household use" secured by a dwelling, so business-purpose investment lending sits outside the Residential Lending, Brokerage and Servicing Act.
• Texas — Lending against commercial and investment property is treated as business lending and is generally not licensed. Lending for consumer purposes, including against a primary residence, is licensed under Texas Finance Code ch. 342. The trigger is the purpose of the loan, not the status of the lender.
• Washington — RCW 31.04.025(2)(e) exempts a person making a loan primarily for business, commercial or agricultural purposes from the Consumer Loan Act - unless the loan is secured by a lien on the borrower's primary dwelling. That exception is narrow and specific, and it is the line to watch if a borrower is pledging the home they live in as additional collateral. Washington applies the same business-purpose logic to usury under RCW 19.52.080.
• West Virginia — W. Va. Code §31-17-1 defines both a primary and a subordinate mortgage loan as one "primarily for personal, family, or household use" secured by a dwelling. Because the purpose test appears in both, lien position does not change the answer here. West Virginia also allows a person who has never held a licence to make up to three such loans a year to purchasers of a dwelling they own, if reported to the Division of Financial Institutions within 30 days.
• Wisconsin — Wis. Stat. §224.71 defines a residential mortgage loan as "any loan primarily for personal, family, or household use" secured by a dwelling or residential real property in the state. Wisconsin also runs a small-volume exemption for a mortgage banker expecting five or fewer residential mortgage loans in the calendar year.
• Wyoming — Wyo. Stat. §40-23-102 defines a residential mortgage loan as a first mortgage loan made "primarily for personal, family or household use" secured by a Wyoming dwelling. Two limits are doing work: the purpose test, and the fact that the Residential Mortgage Practices Act reaches first mortgages only.

Why the six matter most

If your property is in California, Arizona, Nevada, North Dakota, South Dakota or Vermont, the business-purpose exemption that private lenders rely on elsewhere does not get them out of licensing. An unlicensed lender operating there is not a grey area - it is a lender doing something the state says requires a licence, which tells you what you need to know about the rest of their compliance.

Every state, with its regulator

Usury is a separate question, and it bites

Licensing and interest-rate limits are different regimes and a lender can be clean on one and not the other. Some states exempt business-purpose loans from usury caps entirely; others apply them regardless of purpose or collateral.

New York is the example worth knowing because the numbers are low and the penalties are not: civil usury at 16% and criminal usury at 25%, with exemptions that turn on the borrower being an entity and the loan being genuinely business purpose. If your rate plus points plus fees annualises above those numbers - and on a short loan it easily can, as the true-cost calculator will show you - that is a question for a New York attorney before you sign, not after.

What to actually do with this

1. Find your state in the table and note the regulator.
2. Search the lender's exact entity name on NMLS Consumer Access. Absence is not automatically damning in an exempt state; a mismatch with what they told you always is.
3. Call or email the regulator and ask the narrow question: does making a business-purpose loan secured by non-owner-occupied residential property in this state require a licence? They answer this for free.
4. Confirm the entity is registered and in good standing with the Secretary of State.
5. Search the county recorder's grantee index for their name - see verify a lender.

Sources

• Private Lender Link, States That Require a License for Private Lending (Dec 2024)
• Silberman Law Firm, Thinking About Hard Money Lending in Texas: Do You Need a License?
• Fortra Law, Hard Money Lending Laws: A Quick Guide
• NMLS Consumer Access (licensee lookup)
• Conference of State Bank Supervisors, state regulator directory
• NY Banking Law §590 (definition of "mortgage loan")
• Ga. Code §7-1-1000 (definition of "residential mortgage loan")
• N.J.S.A. 17:11C-53 (definition of "residential mortgage loan")
• Texas OCCC, regulated lender licensing
• Ohio Rev. Code §1322.01; Ohio Admin. Code 1301:8-7-02
• 7 Pa.C.S. §6102 (definitions)
• C.R.S. §12-10-702(21)
• Va. Code §6.2-1600; 10VAC5-160-10
• Md. Code, Fin. Inst. §11-501, §11-521 (independent evidence of commercial purpose)
• RCW 31.04.025 (application of the Consumer Loan Act)
• MCL 445.1651a (definitions)
• 205 ILCS 635/1-4 (definitions)
• Tenn. Code §45-13-105 (chapter definitions)
• Mass. Gen. Laws c.255E §1 (definitions)
• Minn. Stat. §58.02 subd. 18; §58.04
• Ind. Code §24-4.4-1-301 (definitions)
• RSMo §443.703(30) (definitions)
• Wis. Stat. §224.71 (definitions)
• S.C. Code §37-22-110 (definitions)
• Ala. Code §5-25-2, §5-25-3 (Mortgage Brokers Licensing Act)
• Conn. Gen. Stat. §36a-485; §36a-487
• Okla. Stat. tit. 59 §2095.2 (definitions)
• KRS §286.8-010(15); §286.8-020
• Ark. Code §23-39-502 (Fair Mortgage Lending Act definitions)
• K.S.A. §9-2201 (mortgage business definitions)
• La. R.S. §6:1083(24) (Residential Mortgage Lending Act definitions)
• Iowa Code §535B.1 (definitions)
• Miss. Code §81-18-3 (S.A.F.E. Mortgage Act definitions)
• N.M. Stat. §58-21-2 (Mortgage Loan Company Act definitions)
• Neb. Rev. Stat. §45-702; §45-703 (exemptions)
• N.H. RSA §397-A:1; §397-A:4 (exemptions)
• W. Va. Code §31-17-1 (definitions)
• 5 Del. C. §2201, §2202 (Licensed Lenders)
• R.I. Gen. Laws §19-14-1 (definitions)
• Mont. Code §32-9-103; §32-9-104 (exemptions)
• Me. Rev. Stat. tit. 9-A §1-301 (Maine Consumer Credit Code)
• Alaska Stat. §06.60.990 (definitions)
• Haw. Rev. Stat. §454F-1; §454F-2 (exemptions)
• Wyo. Stat. §40-23-102 (definitions)
• D.C. Code §26-1101(12) (definitions)

Questions people actually ask