Non owner occupied loan programs

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Apply by Jan. Scott Steinberg 5-minute read. November 03, Mortgages and loans for investment properties, also known as non-occupied-owner mortgages, work a little differently from those designed for use when purchasing personal homes. On the one hand, getting a mortgage for a rental property, also called a non-occupied-owner loan, isn't much different from getting a mortgage for a primary residence in theory.

But on the other, non-occupied-owner mortgage rates can also be higher, loan terms shorter, and down payments larger, even as application requirements can vary somewhat. Here, we take a closer look at how non-occupied-owner mortgage loans work, what non-occupied-owner mortgage rates look like, and what real estate investors need to know about these borrowing programs.

In effect, real estate investors who do not plan to use a property as their primary residence will want to obtain a non-owner-occupied mortgage. Also be aware: Because these loans are meant for properties that are owned purely for investment purposes, there are higher-interest non-owner-occupied mortgage rates as a result. In addition, lenders may also require borrowers to put down a larger down payment as a safeguard against the increased risks that non-occupied-owner properties present as well.

At the same time, the residential mortgage market is also heavily regulated to protect both home buyers and the U. Looking to apply for a rental property mortgage on an investment property? Lenders consider mortgages along a spectrum of risk. Higher risks are associated with the higher interest rates charged on non-owner-occupied mortgage rate programs.

The type of property and number of residences may impact your interest rate as well. While a home buyer can extend repayment over 30 years, non-owner-occupied mortgage lenders tend to offer much shorter terms.

Most non-owner-occupied mortgage loans are adjustable-rate mortgages ARMs , which can cost investors much more should interest rates rise significantly. Additionally, lenders will want to see a manageable debt-to-income ratio DTI and large cash reserves to cover unforeseen costs or vacancy rates.

You can also access alternative financing options beyond non-owner-occupied mortgages if you wish to expand the scope of your real estate investments. Not only can greater proximity to your real estate investments make them easier and less convenient to maintain and upkeep, you can also pay off the mortgage faster on your personal residence using this strategy.

The property is called the securing collateral. In more simple terms, the borrower offers their property to the lender in exchange for a loan. This way if the borrower stops making the loan payment the lender can take the property to recoup their losses. Below are examples of non-owner occupied property that would qualify as the securing collateral.

A non-owner occupied home is NOT your primary residence. It can be your second home or an investment property.