Conventional mortgages are the ‘traditional’ mortgage most people think of when they talk about home loans. It doesn’t have government backing like FHA and VA loans have and is the reason they generally have stricter guidelines.

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Owner Occupancy Requirements and Conventional Loans

Many factors set the conventional loan apart from government-backed loans, but the owner-occupancy requirements are one of the top reasons. You don’t have to live in the home you using a Fannie Mae or Freddie Mac loan.

Like all loans, you must disclose your intention for the home when you secure financing, but you’ll still be an eligible applicant if you use it for a second home, vacation home, or investment property.

What is Owner Occupancy?

When a loan program states you must occupy the property as your primary residence, they mean you must live in the property for ‘most of the year.’ If you have other properties, you must prove that you receive your mail and do most of your business from the home you’re financing.

If you use conventional financing for an owner-occupied property, you’ll secure the lowest rates and the best terms. Lenders see owner-occupied properties as the lowest risk of default because it’s the home you live in full-time. You’re more likely to make your payments on time and avoid defaulting so you don’t lose the place you live.

What’s the Risk with Non-Owner Occupied Properties?

Let’s take your vacation home for example. If you lose your job or fall ill and can’t pay your bills, the first bill you’ll likely stop paying is your vacation home mortgage. It’s not your primary residence, so you won’t be without a home to live in, so it doesn’t take top priority.

Investment homes pose a similar threat. If you lose your tenants and can’t replace them, affording two mortgages may prove to be too much. If you default, yes it will hurt your credit and your chances of securing a mortgage in the future, but you won’t lose the home you live in.

Conventional Loan Rates and Owner Occupancy

Borrowers securing financing for their owner-occupied home usually get the best rates and terms. You have the lowest risk of default and if you qualify for conventional financing, you have good credit and decent debt-to-income ratios.

Financing your non-owner occupied home may result in slightly higher rates or different terms, but conventional financing still provides attractive options. If you have a large down payment for a non-owner occupied property, you decrease the risk of default and increase your chances of securing a great interest rate and/or term for your non-owner occupied home.

Let’s Talk about your Home Loan Needs

I’m happy to help you find financing for any property purchase, whether owner-occupied or non-owner occupied. I work with many lenders throughout Colorado who have great programs for vacation and investment home programs, along with owner-occupied conventional loan programs.

Call me today and let’s explore your loan options.

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