Owner-occupied loan properties exist as an attractive option for real estate investors who are willing or able to settle down in a specific area for a given period of time. Owner-occupied loans can be attractive options for investors especially because it gives certain benefits not available to other loan borrowers. Benefits may include effective property management, property tax deductions, and other owner-specific advantages. This makes it an attractive option for those looking to invest in the real estate market.
When applying for an owner-occupied property, one of the most important things to consider is the stipulations surrounding such a loan. Also, knowing how to make the most of the loan while occupying the property is a great way to start.
What Does Not Count as Owner-Occupied:
As it suggests in the title, the loan is available to those residing in the property. Second properties, vacation homes, estates, and other forms of residency where the owner is not the primary occupant do not qualify for owner-occupied loans. When signing on for owner-occupied loans, investors believe the borrower to be the primary resident. Signing for someone else who may not be able to obtain a loan can be considered fraud, which comes with steep penalties for the signer.
How Long Do I Have to Live in an Owner-Occupied Loan Property?
Once you have secured an owner-occupied loan, the general rule is that you must move in within 60 days of obtaining the loan. The borrower signs a contract to uphold the stipulations of the owner-occupied loan, which in most circumstances requires the owner to reside in the property for 12 months as their primary residence.
When looking at whether to lend, investors are more likely to give a loan for a property if they know the borrower will be residing in the property. Along with the other benefits that come with owner-occupied loans, the borrower does not need as high of a credit score or an exit strategy for remodeling a property usually associated with hard money.
Does The Time On An Owner-Occupied Loan Vary?
In the case of an owner-occupied loan, it is always important to consult your individual contract. Although the general consensus is that a borrower must live in the home for 12 months, this may vary depending on region or lender.
When Can I Rent Out My Property?
With the popularity of renting out homes to generate passive income, homebuyers may look for ways to turn their owner-occupied property into a rental. Again, it is important to consult your individual contract, but after twelve months of occupancy, it is possible to do so in your primary residence. Renters can stay on the property, making you immediate landlords, or in the case of having to move or wanting a new location, converting an owner-occupied property into a rental is possible after the fixed period of time in which the borrower must be the primary resident.
Owner Occupied: Think Trusted Lender
The lender is one of the most important aspects of an owner-occupied loan. A trusted lender can ensure that the contract lines out the steps of owner-occupancy, and provides clarity if trying to convert to a rental. This will ensure success for both parties, and lead to clear guidelines for occupancy. A lender who will be transparent with expectations is best for any owner-occupied borrowers, especially those starting out in real estate. Those that simplify the process, like JMJ Funding, will make it easier for borrowers to achieve their real estate goals.
