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There is a bias in mortgage lending toward owner-occupants. It manifests itself in many ways. The rates for owner-occupants are almost always lower than the rates for investors. The amount of required down-payment is lower. Many condominiums do not qualify for the sale of loans to Fannie Mae and Freddie Mac if they do not meet the minimum standards of owner occupancy.

In truth, there is some basis for this approach. It is much easier to “walk away” from an investment than it is from the home where you and your family live. On the other hand, if proper underwriting approaches are utilized, and the Lender can develop a profile of the borrower which connotes character and reliability, the writer is not convinced that it is always fair to take a different approach to investors from owner-occupants in terms of cost of borrowing and qualification.

Having said all this, there are some interesting sidebars when it comes to determining who is an owner-occupant, and who is not. Is a borrower who purchases on October 1, and permits the Seller to remain in occupancy through December 15, an owner-occupant? The underwriting guidelines normally would say “no”. Any delay in actual occupancy past 45 days after closing is proscribed. I am not sure I understand the logic, but that is a fact. What if you purchase a unit, and decide the next day you are going to take a three year hitch in London to advance your career. The guidelines say that if at the time of purchase you had an intent to occupy, that will be enough. I somehow think that the person who has a longer than permitted delay in actually occupying the property rather than a person who purchases, and then relocates almost immediately, would be more easily characterized as an owner occupant, but there are strange idiosyncrasies in all aspects of mortgage underwriting, and this is just one more instance.

Interestingly enough, the now fairly rigid FNMA/FHLMCC rules have given rise to some “niche” Lenders, who have determined that the percentage of occupants who own, or rent, is not really a major factor in determining whether a person will qualify for a mortgage loan. These Lenders, most of which are local thrifts, have actually benefitted from the owner-occupancy requirements of the national Lenders to find new opportunities to make safe loans. I am aware of at least five (5) local Lenders, and one national  Lender, who will make mortgage loans in this situation. Again, local Lenders often have the advantage of knowing their customers and that gives them an added edge in making underwriting decisions.

For your information, several Massachusetts cities and towns have provided tax incentives for people who own property and reside in same. I am familiar with such tax credits in the cities of Boston and Cambridge and the town of Brookline. Those of you who may be considering “kiddie-condominiums”, that is, purchasing a condominium for your child who will attend college or grad school in any of these jurisdictions, may be interested in the planning possibilities presented. If you wish to discuss further, call or email the writer.


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Dan Hopper
Dan Hopper - Individual Proprietor - Westminster, CO
Denver Realtor / Author / Advocate/Short Sale

No doubt about it, Elliiot.  There are too many ridiculous rules as it pertains to "owner-occupant", thus creating problems in soem of the necessary financing for 1st time buyers out there.  Condos are unfairly picked on, too.

Aug 23, 2012 02:14 AM #1
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Elliott S. Topkins

Massachusetts Real Estate and Title Atty
I need a Massachusetts real estate attorney
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