Residential Owner Occupied Loans

There are many different types of mortgage loans. One of the most popular types is residential owner occupied loans. These types of loans cater to a specific type of borrower. Are you eligible for residential owner occupied loans? Find out now.

What Does Owner Occupied Loans Mean?

Residential owner occupied loans simply mean that at least one of the borrowers on the loan documents lives at the mortgaged property. For some loan programs, the borrower must live in the property for the duration of the loan. Other loan programs set a time frame for how long a borrower must live in the property.

What If I Intend On Flipping The Property?

For a while, “house flipping” was gaining in popularity. According to the REA, about 6% of homes that were sold in 2016 were “flips”. It was the largest percentage of houses sold by “flipping” in a decade. Flipping a house is when you buy a house, make some updates or repairs, then turn around and sell it as quickly as possible for profit.

Unfortunately, residential owner-occupied loans are not built for this type of real estate transaction. When you sign on the dotted line for an owner-occupied loan, you agree to a specific time frame of residency. In most cases, that borrower’s residency period is never less than a year. This type of mortgage is not suitable for investment purposes.

Lender’s Know

These types of loans often offer better rates, which means they are very attractive to homebuyers. You may think that you can skirt the system and not live in the property and the lender will never know, but they will know. Lenders will check things like property tax records, and homeowners insurance, and even drive by the property to see if an owner is occupying the property. Of course, there are a few exceptions to the rules.

If there is a need for extensive rehabilitation to the property that makes it unsafe to live in, you may be granted an exception during the time the work is in effect. You will need permission from the bank prior to the closing date to not live in the space.

Navigating the mortgage system can be a challenge. Many buyers prefer to have a broker handle the transaction. Get professional help with your mortgage and let our experts guide you through the process. Give us a call today to get started.