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Because Alt-A loans are also the financing of choice for most non-owner occupied, investment properties, as a class they represent a far greater likelihood of borrower default than conventional, conforming mortgages, since people are more likely to abandon a property in which they do not live than they are to risk losing their primary homes. As ...
The loan type (conventional loan, FHA loan, VA loan or a loan guaranteed by the Farmers Home Administration) The type of property involved (single-family, multifamily) The purpose of the loan (home purchase, home improvement, refinancing) Owner occupancy of the property (owner occupied or non-owner occupied) The loan amount
Typical bank loan terms on an OOCRE: Amortization Period are typically 15, 20 or 25 years. Term period 5 to 25 years, if it does not match the amortization period, it is considered a balloon payment mortgage; Rates: most banks prefer to lend at variable rates (typically tied to Prime Rate or LIBOR). Some banks offer fixed rates for a term period.
HARP 2.0 refinancing is allowed on all occupancy types: primary residence (owner-occupied), second home, or investment (rental) property. However, HARP 2.0 refinancing of investment properties by Fannie Mae and Freddie Mac has higher mortgage rates than for owner-occupied properties.
A non-owner occupied property is viewed and priced as the highest risk factor of property use. Lenders will factor in a 0.5% to 2.5% pricing increase to mitigate the perceived risk. Criticism
Various restrictions apply, but the main ones are that aid is available only for owner-occupied homes and that an applicant's total household income must be no more than 150% of the area median ...
Because lenders typically charge a higher interest rate for non-owner-occupied properties, which historically have higher delinquency rates, the lender receives insufficient return on capital and is over-exposed to loss relative to what was expected in the transaction. In addition, lenders allow larger loans on owner-occupied homes compared to ...
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related to: non-owner occupied loans