Owner-occupancy means the home you're financing will be your primary residence, the place you actually live most of the year. Lenders sort every loan into three occupancy types: a primary residence, a second home or an investment property. The first one gets the smallest down payments and the lowest rates, because people protect the roof over their own heads first.
What each program asks
| Program | Occupancy rule | Smallest down payment |
|---|---|---|
| FHA | One borrower moves in within 60 days and stays at least a year; 1 to 4 units | 3.5% |
| Conventional | Primary residence per the mortgage's occupancy clause, which uses the same 60-day and one-year terms | 3% single-family (first-time buyer), 5% on 2 to 4 units |
| VA | Veteran moves in within a reasonable time, generally 60 days; 1 to 4 units | $0 |
| USDA | Primary residence, single-family only | $0 |
Conventional loans also come in second home and investment versions, with larger down payments. DSCR loans are built for the investment side and qualify on rent alone.
Why it changes the down payment
A buyer looking at a $380,000 duplex can buy it two ways.
As an owner-occupant on FHA, living in one unit, the down payment is 3.5%: $380,000 × 3.5% = $13,300. The lender also adds 75% of the other unit's expected rent to the buyer's income.
An investor who won't live there would use a DSCR loan, and at 25% down that takes $380,000 × 25% = $95,000.
Living there saves $81,700 in cash at closing. House hacking, buying a 2 to 4 unit home and living in one unit, runs on that difference: a first-time buyer gets a rental unit for an owner-occupant's down payment.
Moving in, then moving on
The one-year rule doesn't lock you in forever. After a year in the home, you can move to a new place, keep the original loan and rent out the home you left. The occupancy promise you sign at closing is about your plans when you buy, and a job transfer or a growing family after you've lived there is a normal part of owning a home.
Owner-occupancy also connects to Florida's homestead exemption. A home you own and live in as your permanent residence on January 1 can qualify for the exemption, which lowers the taxable value and caps yearly assessment increases. That trims the tax part of your monthly payment.
A parent can help without moving in. FHA lets a family member join as a non-occupant co-borrower on a single-family home at the full 96.5% financing, as long as you're the one living there.
Run a duplex or fourplex through the house hacking calculator to see how the rent helps you qualify. If you're weighing a home to live in against a pure rental, call AAA Capital Funding at 888-601-8344 and we'll price both side by side.