Occupancy for Loans- S2 E2 MMM

    Occupancy for Loans- S2 E2 MMM

    Home Buying

    February 16 2019

    Let’s dive in today’s topic: occupancy for loans.

    When applying for a loan it is necessary to determine the borrower’s ability and willingness to repay a loan in accordance with its terms and to determine if the subject property provides and maintains sufficient value to regain the investment.

    A loan’s occupancy type indicates the occupancy status of the mortgaged property.

    Property Type
    • Investment – Indicates that the borrower does have the property for personal use and most likely offers the property for rental.
    • Primary Residence – usage property type where the borrower lives in the property.
    • Vacation Home/ Second Home – Here the borrower maintains the property for personal use and does not offer the property for rental.

      Let’s go more in depth about these 3 property types based on the usage

    Investment Properties

    If a home is used as a rental property, which you earn income from, it’s considered an investment property. Any type of property, such as single-family homes, multi-unit properties or condos, can be an investment property. If you simply act as the owner and landlord of a rental home, it’s considered non-owner occupied. However, if you physically live at the property, it’s classified as owner-occupied. This type of situation can occur if you own a multi-unit home such as a duplex — you live on one side, and your tenant lives on the other.

    Primary Residence

    We defined properties as “primary residences” when you live there for the majority of the year and you don’t ever rent it out, even during the time you’re not living there. It’s common to see that the lender asks for some legal proof that shows your intention to occupy the property.

    Vacation Home/Second Home

    On the vacation home, the owner usually stays in the property for just a small period of time every year. it has the same requirement than the primary residence, as it can’t be rent out to be considered a second home in the eyes of the lender.

    So that’s all for today, hope you found this article useful so far and don’t hesitate in reaching me out if you have any questions or need a consultation.

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