Owner-Occupied Mortgage vs. Non-Owner occupied

There are generally three types: owner-occupied; second home; and non-owner- occupied properties {rental properties}. A mortgage on a non-owner-occupied property might have a slightly higher interest rate than an owner-occupied mortgage, as non-owner-occupied mortgages are more likely to default. Because of the higher interest rate, some unscrupulous borrowers will try to classify a non-owner-occupied mortgage as an owner-occupied mortgage to try and save money.

When you fill out a mortgage application, the lender asks you if this is going to be an owner-occupied property. If you answer “Yes,” you are telling the lender that you intend to move into the property and live there as your primary residence. If you answer “No,” then you are signaling that this will be either a second home or an investment property.

Owner-occupied properties can get financing at a lower interest rate than investment properties, which typically are charged not only a higher interest rate but additional points and fees. At least some of the millions of investors who bought investment property over the past few years attempted to save money by claiming that the homes they were buying were going to be owner-occupied — even though they knew they weren’t going to live there.

You’re supposed to fill out the application truthfully. Any time you put anything down on a mortgage application that isn’t true, you may be committing fraud against the lender.

This entry was posted on Friday, October 17th, 2008 at 6:12 am and is filed under RE Questions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.