Nonowner-occupied Loans for Residential 1-4 Units


What is a nonowner-occupied loan for residential 1-4 units?

A nonowner-occupied mortgage is a loan for a single family residence, duplex and triplex or fourplex, where the residents are renters. This type of loan does not cover the scenario where a duplex owner lives in one unit and rents out the other because that is considered owner-occupied. The residence may also be a condominium or townhome.

Are conventional mortgages available for nonowner-occupied residences?

Yes, they are. Banks and non-depository lenders offer conventional mortgages to purchase or refinance a nonowner-occupied home. They usually limit the number of mortgages a borrower can have before they will give another one to the same borrower, often to only four. Investors can refinance a nonowner-occupied home to get a home equity loan. HELOCs are available too. Find conventional mortgage loans on nonowner-occupied residences.

What if the borrower doesn’t qualify for a conventional nonowner-occupied home loan? 

These are common reasons to find a Non-QM lender. This group of mortgage lenders serve real estate investors that fall just outside of conventional guidelines, so they’re OK with being the 5th or more mortgage, with larger loans, lending to the self-employed and lending to people with a recent credit ding. People whose main business is real estate investing would use a Non-QM lender because they can’t prove income via W-2 statements, which is required of conventional borrowers.

Are there hard or private money loans for real estate investors in nonowner-occupied residences? 

Yes, there are. Hard money often seems custom-made for real estate investors. These loans can fund within a few days of application and, generally, as long as 25% or more of free equity remains in the purchase or refinance, hard money lenders will consider writing the loan. For example, the investor that pays cash for the rental home, can take that money out via cash-out mortgage the day after closing, with hard money. Hard money lenders also don’t require the investor to provide the same level of documentation (income, assets, liabilities, etc…) because the underwriting is based on available equity in the property.

Are there construction loans for nonowner-occupied residences?

A real estate investor can build from the ground-up on an owned lot, or can finance the lot. Sometimes a rental property needs extensive rehab or repair such that a construction loan makes sense. If this is the case for your client, use Lender Search to find these investor construction loans.

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