Are you occupying or not occupying? THAT is the question.


Telling a lender you’re going to occupy (live in) a property and then not doing so is a form of fraud.  I’m amazed at how people what steps people will take in order to shave a little bit off of their interest rate (NOO is roughly 0.5% higher in rate for a 20% down fixed conforming product).

Here are basic lender guidelines for what is considered "owner occupied":

  • You must live in the home for a majority of the year.   Typically, a borrower is agreeing to live in the property for a minimum of 12 months following obtaining a mortgage.
  • The home needs to be located within reasonable distance to your work.
  • The home should make sense with your family (is it large enough for your dependents).
  • You do not have a rental agreement on your "owner occupied" home.
  • You can only have one "primary residence".

Second or vacation homes have these guidelines:

  • Typically located in a "vacation" area and available for year round occupancy.
  • Should be approx. 50 miles away from current residence.
  • The property cannot have "time-share" interest and cannot be rented.
  • You can only have one financed "second home".

If your property does not meet the guidelines above, it may very well be considered an investment property (non-owner occupied) in the eyes of an underwriter.   Recently new guidelines became available that accommodate borrowers helping family members, such as The Family Opportunity Mortgage.

Many of the guidelines are up to underwriter discretion and plain old common sense.  If you are buying a home as "owner occupied", the lender is anticipating that you will live in the property. 

If you have other intentions, it’s important that you openly discuss them with your Mortgage Professional so that you don’t unintentionally commit lender fraud.

The FBI states on their press release from December 2005:

Mortgage Fraud is one of the fastest growing white collar crimes in the United States. Mortgage Fraud is defined as a material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or insure a loan….The borrower makes a few misrepresentations, usually regarding income, personal debt, and property value, or there are down payment problems. The borrower wants the property and intends to repay the loan. Sometimes industry professionals are involved in coaching the borrower so that they qualify. Fraud for Property/Housing accounts for 20 percent of all fraud

When you’re obtaining a conforming mortgage, at application and again at closing, you sign affidavits stating that you intend to occupy (or not to occupy) the property that is being mortgaged.    It is much better for you to be upfront and ask your Mortgage Professional if your situation meets the guidelines of an owner occupied property than to have the lender call your Note due, or worse…how about a little jail time?   


  1. We live in a house thats owner occupied by my husband and his father. We have lived here for 15 years. Now my father in law wants to move with his daughter out of state. Could the mortgage company have a problem with this?

    • Heather, I don’t think the mortgage company would have a problem with you staying in the home (not sure if that’s what you’re asking)?
      Your father in law may have to qualify with both mortgage payments unless you can document that you’ve been paying rent on his tax returns.

  2. To qualify for owner occupied do both the borrower and the co borrower have to occupy the home at least 51%?

    • Pam, it’s not classified as a cut and dry 51% of the time with regards to how a lender views occupancy. It bottom line needs to make sense to an underwriter/lender.

      • In regards to the previous question do the borrower and co-borrower both have to occupy the residence, or is one borrower sufficient?

        • If one borrower is not occupying, they are considered a “non-occupying co-borrower”. It will most likely be considered an owner occupied property (depending on the details of the transaction… for example, is this a married couple or a co-signer). Lenders have different guidelines regarding non-occupant co-borrowers as well.

  3. Hi,
    I need some info on buying a second property from HUD. Currently I live on a 5 bedroom, 4 bath. My parents, Brother, Sister, nephew 5 year old, Brother in law lives with me they pitch in some money. I want to buy a property to make it my primary resident. it is a hud home which is for a110,000 dollars. I pay mortgage on the 5 bedroom house, which I own 210,000. I currently have 2 jobs makes enough money for this house. My question is, Since I own this 5 bedroom property, am I eligible to buy this bank owned property which is selling for only owner occupants? I want to move to the new house with my wife and kid.

    • Hello Stan,
      How long have you been employed at both jobs?
      What is the size of the HUD home? If you’re buying a much smaller home than the 5 bedroom home, sometimes underwriters may think that you’re buying an investment property.
      How long has he been working his two jobs?

  4. I bought a condo as a second home about 80 miles from my primary residence and got a mortgage on it for 80% of the value. It sits empty much of the time, as I only use it in winter. Is it OK to rent it out during summer and other times when I don’t plan to use it?

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