Non-Owner Occupied Loans

When you live in the home that you pay a loan on, this is called an owner occupied Mortgage. Even if the property has up to four units, and you live in one, it is still considered as owner occupied.  If you have a second home that acts as a vacation home, this is also considered owner occupied.

When you apply for the mortgage, the status of your property will be set as owner occupied or non-owner occupied depending on whether you plan to live there after the loan closes. In this week’s blog post, Stonebriar Mortgage helps real estate investors learn more about non-owner occupied loans in the Dallas Texas and California markets.

Buying an Investment Property with a Non-owner Occupied Loan

Real estate is a great investment, especially if you can generate a lot of income off renting the property out. A property with up to four units where you do not plan to live on-site is considered as non-owner occupied if you plan to rent the units for income. Provide accurate information as to your plans with the property when you go to apply for the loan. If your plans change after the purchase is made, you are fine, so long as your intent was accurate at the time you applied for the mortgage.

For example, you may apply and plan to live on the property, but then you get a job transfer and must leave. This is fine, if you plan to rent out the property, you do not need to change the loan so long as your original application was accurate. You must consider whether to buy a second home in the new area or rent. For this reason, you want to shop around when approving an investment property. The expenses can add up with an investment home that is non-owner occupied, but they are usually worth the wealth gained in ownership.

Costs Associated with Non-owner Occupied Homes

Since you will rent the property out to various tenants, you need to make sure you manage your business well and follow legal procedures for renting. Here are some of the costs you may expect when running the home:

  • Costs to market the property, sign leases, and turn-over the apartments if the tenant decides to vacate (you can consider using a third-party property management company to do all of this for you).
  • Costs for utilities, trash, water, and internet or laundry—you can also look for ways to include these costs in the rent you charge or ask tenants to pay for certain things on their own.
  • Costs for legal fees to ensure you properly maintain the place, address any tenant grievances, or proceed with eviction paperwork if a tenant is breaking the lease agreement.

You can always look for ways to do things on your own and save. Stonebriar Mortgage enjoys helping clients find their second home in Dallas, Texas and California make great income from non-owner occupied loans. Contact our staff today to get started!

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