Owner Occupancy

I often get asked at the settlement table – Why are 5 different lender documents required if the borrower is going to occupy the property?

The answer is the interest rate and the type of loan offered by the lender may be directly related to owner occupancy. If the property will be owner-occupied, the client usually gets a better deal on the interest rate and fees. The theory being owner occupants typically take better care of the property, are more likely to protect the lender’s interest in the property and are less likely to walk away from the property. At closing, the borrower will sign a Deed of Trust to secure the loan against the property and the Deed of Trust says the following:

“Borrower shall occupy, establish and use the Property as Borrower’s principal residency within 60 days after the execution of this Security Instrument and shall continue to occupy the property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower’s control.”

The lender wants to be sure that it is your intention on the day of signing is you will be living in the property as your principal residence for at least a year and within 60 days.