Condo With Less Than 51% Owner Occupancy? OK For Conventional Loans

Mortgage and Lending with Caliber Home Loans NMLS#284800

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, lenders will typically shy away from condo complexes with low owner occ numbers.  Condo Financing

FHA wants a minimum 51% of the units to be owner occupied. Most lenders offering Fannie and Freddie financing want a minimum 51% ratio as well. Some have an additional overlay as high as 70%. Did you know that for purchase and refinances of a primary residence or second home that 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.

Some 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.  

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%.

If you have had a condo deal unravel in 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! I may be able to help.

Posted by

 Kevin Kueneke, NMLS # 284800
San Diego County Mortgage Specialist
VA Mortgage Loan Specialist | FHA Mortgage Loan Specialist
Direct Lender | Mortgage Banker
Phone 760-500-1919 | Fax 619-419-2324

Visit My Website: 

Mann Mortgage LLC | NMLS #2550
11230 Sorrento Valley Road Suite 225| San Diego CA 92121


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Kevin Kueneke

San Diego Mortgage Banker
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