Fannie Mae has owner occupancy requirements in place for some of the homes it sells to encourage homeowners to buy the properties before investors. Occupancy rules usually apply to homes during at least the first two weeks of the initial listing, before non-occupant investors can have their bids considered. Occupancy rules vary by property type, with primary residences carrying the most restrictive requirements.
Fannie Mae imposes a variety of occupancy requirements for property owners in an effort to guide properties into the hands of families and residents as opposed to investors. Depending upon the type of property in question, occupancy rules may vary significantly.
A person buying a primary single-family home with Fannie Mae's owner occupancy requirement must agree to move into the home within 60 days of closing the loan, and to live there for at least an entire year. Buyers who fail to comply can face a penalty of $10,000 and lose any earnest money paid.
The single-family occupancy requirements still apply to buyers who purchase a multi-unit home, and they will have to live in one of the units. Buyers may rent out the other units to tenants, as long as they still live in the unit they picked as their primary home for at least a year after buying the property.
Other Property Types
A borrower does have to occupy a single-family second home for some part of the year, but isn't bound to same length requirements as those in a primary home. The second home has to offer living space availability all year, and the borrower can't rent it out, use it as a part of a timeshare arrangement or give occupancy control to a property management firm. For homes with businesses, such as a home with an office space, the borrower must follow single-family occupancy rules and also own the business.
If there are multiple borrowers, only one borrower has to occupy the home to satisfy the one-family occupancy requirement, but a co-borrower, co-signer or guarantor whose income is included in the loan approval process is also subject to owner occupancy rules if the combined loan-to-value ratio exceeds 90 percent. Some borrowers may meet the occupancy requirement even if they don't live there.
For example, a parent who wants to provide a home for a physically or mentally disabled adult child is considered the occupant if the child's income isn't enough to qualify for the loan or the child can't work. An adult child who is buying the house for senior parents is the occupant if the parents don't have enough qualifying income or can't work. Fannie Mae may waive the occupancy requirements if the situation is caused by circumstances beyond the buyer's control.