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Seller Rent Backs & Owner Occupancy Rules

OWNER OCCUPANCY

Fannie Mae, Freddie Mac and FHA all require buyers to move into a financed property within 60 days of close of escrow to meet owner-occupancy requirements.

As a reminder, FHA offers only owner-occupied financing (FHA offers no investment property financing), and Fannie and Freddie of course offer much better terms for owner-occupants b/c the default risk is much lower.

SELLER RENT-BACKS FOR 60 DAYS

Sellers can rent back a property they just sold (and remain in the home) for up to 60 days after close of escrow. We often tell Realtors and Buyers, however, to limit the rent backs to 59 days to ensure that the new buyers are able to move into the property by day 60. We want to avoid a potential breach of the owner-occupancy rules and a potential delay in closing time by a persnickety underwriter.

OVERLAYS AND EXCEPTIONS

Some mortgage lenders have “overlays” that limit rent-backs to only 30 days, and many jumbo lenders have 30 day limits as part of their hard and fast rules. As a reminder, an “overlay” is an additional requirement or rule that lenders add on top of agency (Fannie and Freddie) or FHA guidelines.

We have no rent-back overlays at JVM of course, but if you are not using JVM for financing, God forbid :), seller rent-backs should be discussed with the lender before they are included in a purchase contract.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646