Condo Owner Occupancy Ratio Less Than 51% Is OK For Fannie & Freddie! As long as the homebuyer will occupy the condo as a Primary Residence or Second Home...
Owner Occupancy Ratio: the number of owner occupied condominiums in a particular condominium complex divided by the total number of units in the project. The lower the number, the higher the rental concentration. 
Since rental properties are riskier ventures for lenders, i.e., someone in financial trouble is more likely to let a rental property go before they let their own home go, many lenders will typically shy away from condo complexes with low owner occ numbers.
FHA wants a minimum 51% of the units to be owner occupied (unless the property is detached and therefore considered a "spot" condo). Most lenders offering Fannie and Freddie financing want a minimum 51% ratio as well. Some have an additional overlay as high as 70%. We do not have that overlay!
Did you know that for purchase and refinances of a primary residence or second home, Fannie/Freddie actually have no minimum occupancy rate? Granted, other details still matter such as litigation, HOA delinquencies, HOA reserves, etc.
This makes sense as each time a lender provides financing for a primary residence in a complex, they are raising the owner occupancy ratio and therefore strengthening the complex. This can also attract more people to buy and live in the project.
A few private mortgage insurance (PMI) companies may require a minimum 51% ratio across the board, so a down payment of 20% could be required, but not necessarily.
We are currently financing condo purchases up to 95% loan to value (LTV) for Primary Residence and up to 90% LTV for Second Homes that are within Conventional Conforming Loan Limits ($417,000). We are also currently funding condo purchases up to 90% LTV for Primary Residences and up to 80% for Second Homes that are within Jumbo Conforming Loan Limits ($546,250 in San Diego County).
Keep in mind, for small condo complexes, four or less units, only one unit can be non-owner occupied. Also, the minimum ratio if purchasing a rental property is still 51%.
I am currently saving a deal where the buyer's original lender denied the loan two weeks into the escrow period due to a low owner occupany ratio, even though the buyer is purchasing a Primary Residence.
If you have had a condo deal unravel in San Diego or other parts of California due to a low owner occupancy ratio and the buyer was purchasing as a primary residence or second home, call me at 760-500-1919 or visit my website: kevinkloans.org
***By the way - these numbers also apply to rate/term refinances***
Comments(1)