What does "Non-owner-occupied" mean?

Definition

A non-owner-occupied property is a home that is not the owner's primary residence. These properties are typically used as rental or investment properties and may have different loan requirements.

Understanding Non-Owner-Occupied Properties

Non-owner-occupied properties often come into play when securing a mortgage for rental or investment purposes. These properties are typically financed differently, with varied terms compared to primary residences. In simple terms, since the owner doesn’t live there, lenders may view them as higher risk. Example: If you buy a $200,000 property to rent out, it’s seen as non-owner-occupied. It's not about the number of properties you own, but about who lives there. It's a common misconception that non-owner-occupied properties are only for large investors. Many individuals purchase them to generate rental income or diversify their investment portfolio.

People Want To Know

What are the downsides of an assumable mortgage?

Downsides of an assumable mortgage include potential higher interest rates compared to current market rates, limited eligibility as not all loans are assumable, and the original borrower's credit may still be affected if the new borrower defaults. Additionally, the seller may face difficulties in qualifying the buyer if their financial situation is not strong enough.

Can you get a mortgage for a non-primary residence?

Yes, you can get a mortgage for a non-owner-occupied property. Lenders often require a higher down payment, typically at least 20%, and may impose stricter credit score requirements, often around 620 or higher. Additionally, the debt-to-income ratio should generally be below 36%.

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More From The Mortgage Glossary

Owner financing

Owner financing is when the seller of a property acts as the lender to the buyer. This arrangement is an alternative to a traditional mortgage from a bank or other financial institution.

Owner-occupied

An owner-occupied property is a home where the owner lives full time. In real estate, this typically means a borrower lives in the home they are financing.

Partial claim

A partial claim is a loss mitigation option for FHA loan borrowers in which a lender pays off your past-due amount and adds it as a non-interest-bearing lien on your home. This is paid off when you sell or refinance.