Mortgage Lending Guidelines For Owner Occupied Home
By Gustan Cho
Owner occupied home mortgage loans offer the best interest rate, lowest down payment requirement, and the best mortgage terms out of all mortgage loan programs. Mortgage lenders view owner occupied home mortgage loans as the less riskier than second home mortgage loans and investment home mortgage loans. The reasoning behind it is because an owner occupied home owner is less likely to default on their primary residence than they would on their second homes and/or investment property in the event there is an extenuating circumstance with the homeowner. There are strict mortgage lending guidelines on how a home is classified as an owner occupied home.
FHA loans are one of the most popular mortgage loan programs where it offers home buyers with less than perfect credit and high debt to income ratios to become homeowners with only a 3.5% down payment. However, FHA loans are only available to owner occupied home owners and are not available for second home buyers and investment property buyers.
Primary Residence: Owner Occupant Homes
An owner occupied home is classified when a home buyer intends in living in the home they are purchasing for at least six or more months out of the year and does not plan on renting it out for at least one year from the date of closing. Mortgage lenders have different classification on residential mortgage loans: Owner occupied mortgage loan borrower, second home mortgage loan borrower, and investment home mortgage loan borrower.
If you are applying for a FHA loan, you need to intend on living on your new home purchase. You cannot lie on your mortgage application and apply as an owner occupied home mortgage loan and then turn around and rent it out without having the intent in living in your new home purchase. However, if you apply for a FHA loan and intend in living in your new home purchase but then change your mind and intend on not living there due to a job transfer, a separation, or other extenuating circumstances, then it is alright. Mortgage lenders require that you live in your owner occupied home for at least one year and you can rent it out after that one year period.