“Owner occupied” financing is more favorable than investment property financing b/c the risk of default is much less. B/c of this lenders need to make sure properties are actually owner-occupied. “Owner occupant” buyers must take possession within 60 days of close of escrow (this is why “rent-backs” can’t exceed 60 days too).
Problems arise if an underwriter suspects a buyer may not move into the property. This occurs if a buyer’s employment is unreasonably far from the subject property, or if the buyer already owns a larger or nicer house. These buyers need to write very convincing letters of explanation to convince the underwriter they will in fact move in. Moving to a better school district is a valid reason, for example.
“Better tea” may not be a good reason :). (We recently had a borrower tell us they wanted to move b/c the water made better tea, and our underwriter was not moved.)
Problems also arise if the property is occupied by a tenant at the time of purchase. In these situations, we will sometimes need a formal “notice to vacate.”
Lenders also condition for closing and post-closing conditions, such as an (1) occupancy certification by a third party company that will knock on the door and verify the names of the residents; (2) an appraisal reinspection to certify vacancy; and (3) utility bills in the buyer’s name.
If these conditions are not satisfied the lender will either not fund the loan, or call the loan due (if they find out a buyer did not move in).
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 310167