Similarly, buyers who participate in HUD (U.S. In return, these government-backed loans absolutely require owner occupancy.įHA and VA loans are intended solely for primary residences and multi-unit properties (up to four units) where the owner lives onsite. Owner Occupired Loan RequirementsįHA and VA loans have some of the lowest down payment requirements––as little as 3.5% down for FHA loans and zero for VA loans. Lenders verify owner-occupancy because of the regulatory requirements, financial implications, and risk factors associated with owners living onsite. After that time, the lender may hire someone to physically verify occupancy, a practice known casually as an “occ knock”. If the borrower indicates that the property will be their primary home, they usually are given 30 to 60 days to occupy the property. When applying for a loan, borrowers are asked whether the property is intended to be a primary home, secondary (vacation) home or investment property. When tenants apply to an owner-occupied rental property, that means the owner lives in another unit on the premises and is likely acting as an onsite landlord. In order to get owner-occupied mortgage rates, investors will sometimes live in a portion of their property while renting out other units (a common practice for multiplex owners). Insurance companies also write different policies based on owner-occupancy, since the risks and coverage needs are different. Owner occupancy is especially important to lenders because of the different terms and rates available for primary homes versus secondary homes and investment properties.
As such, an owner-occupied property is one where the legal property owner lives full-time on the premises.
In real estate, lending, and insurance terms, owner-occupancy refers to the owner residing at the property. The short answer is “yes, sometimes”, but the more complete answer requires a closer examination of lending practices and occupancy fraud. Because loan terms differ based on occupancy type, lenders will often require primary home loan borrowers to sign an affidavit that states they will personally occupy the home for a certain amount of time.īut what if homeowners decide they want to rent out their primary residence before the specified time is up? Is there a way to get around owner occupancy in a mortgage contract?
When it comes to financing a property, owner occupancy is an important consideration.
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