Mortgages & Home Loans What Is an Owner-Occupant? Owner Occupancy Explained By Dawn Papandrea Dawn Papandrea Twitter Website Dawn Papandrea is a credit card expert with 10+ years of experience covering credit cards, banking, and personal finance. Her reviews of credit cards and other financial products appear on The Balance and on personal finance sites elsewhere. Dawn earned her master's in journalism and mass communication from New York University and has a bachelor's in English from St. John's University. learn about our editorial policies Updated on December 28, 2021 Reviewed by Doretha Clemon Reviewed by Doretha Clemon Doretha Clemons, Ph.D., MBA, PMP, has been a corporate IT executive and professor for 34 years. She is an adjunct professor at Connecticut State Colleges & Universities, Maryville University, and Indiana Wesleyan University. She is a Real Estate Investor and principal at Bruised Reed Housing Real Estate Trust, and a State of Connecticut Home Improvement License holder. learn about our financial review board Fact checked by Jane Meacham Fact checked by Jane Meacham Twitter Jane is a freelance editor for The Balance with more than 30 years of experience editing and writing about personal finance and other financial and economic subjects. learn about our editorial policies In This Article View All In This Article Definition and Examples of Owner-Occupant How Does Being an Owner-Occupant Work? Pros and Cons of Being an Owner-Occupant What Being an Owner-Occupant Means for Owners Photo: sturti / Getty Images Definition An owner-occupant is someone who purchases a property with rental units, then also resides there. Definition and Examples of Owner-Occupant An owner-occupant is someone who purchases a property that will generate rental income while also living there. So, for example, if someone were to purchase a three-family house, they would live in one of the units as the landlord, and rent out the other two units. Alternate definition: Owner-occupant is the opposite of an absentee ownerAlternate name: Owner-occupier How Does Being an Owner-Occupant Work? When you’re purchasing a multi-unit property, some mortgage programs will require you to be an owner-occupant. This includes home loans from the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) loans, and U.S. Department of Agriculture (USDA) loans. If your loan program has an owner-occupancy requirement, you will be asked to certify that you will live in the residence for a specified amount of time. For a Department of Housing and Urban Development (HUD) property, for example, the certification requires at least 12 months. For other programs, like the HUD Good Neighbor Next Door, the occupancy requirement is three years. Note Occupancy fraud is a serious crime. People who lie and say they will live in an investment property then do not, or act as “straw buyers” (obtaining a mortgage for someone else under false pretenses), can get into big legal trouble. The lender could raise your interest rate, demand full payment, or even foreclose on you. Not to mention that you could be fined or brought up on federal charges. Pros and Cons of Being an Owner-Occupant Pros More loan options and favorable rates Rental income to cover home expenses Present on-site to manage any issues that arise Cons Potential tenant challenges Fewer tax write-offs Pros Explained More loan options and favorable rates: Being an owner-occupant allows you access to more loan programs, including FHA, VA, and USDA loans. It also could mean getting better interest-rate offers on conventional loans because lenders view owner-occupants as less risky than absentee owners. Rental income to cover home expenses: Living in a home that has rental units can bring in a steady income stream that can help cover the mortgage and other costs. You’re present on-site to manage any issues that arise: Living in the same property as your tenants means being able to address needed repairs quickly, as well as ensuring that the property is being cared for and maintained well. Cons Explained Potential tenant challenges: There is always the risk that a tenant might not be able to pay their rent, or might be disruptive by being noisy or damaging property.Fewer tax write-offs: When you are an owner-occupant, you don’t get as many tax deductions for property management as you would if you didn’t live on the premises. What Being an Owner-Occupant Means for Property Owners If you’re thinking of purchasing a multi-unit home that also will earn rental income, deciding if you want to be an owner-occupant is one of the major decisions to make. It will not only affect your lifestyle and income, it further will affect the types of loans you can qualify for and your overall finances. Though it may be tempting to falsely claim you will be an owner-occupant to take advantage of better interest rates and loan programs, or to try to secure a mortgage for a family member who can’t otherwise qualify, doing so would mean you were committing fraud—and there are serious consequences for that. Be sure that if your loan program requires you to sign an occupancy certification that you continue to live at the property for the required amount of time (usually 12 months or more). Key Takeaways An owner-occupant is someone who makes the property they own and rent out their primary residence.Some mortgage programs require borrowers to remain owner-occupants for a set amount of time, rather than absentee owners.Being an owner-occupant has pros and cons, so be sure you understand your responsibilities when making a real estate decision that requires this. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Department of Housing and Urban Development. "Exclusive Listing Period Purchase Addendum for Individual Owner-Occupant Buyers." Accessed July 7, 2021. U.S. Department of Housing and Development. "Good Neighbor Next Door Mortgages." Accessed July 7, 2021. Internal Revenue Service. "Tips on Rental Real Estate Income, Deductions and Recordkeeping." Accessed July 7, 2021.