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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.
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.
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.
Some lenders price eligible owner-occupied properties differently from second homes and investment properties. Your available rate and terms also depend on credit, down payment, loan type and other factors.
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.
Owner occupancy is one factor in conventional loan pricing, but it does not guarantee any particular rate or terms. Compare actual offers, including APR and closing costs.
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.
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.
