One of the key factors to Mortgage Brokers processing a loan for a San Diego Condo is the owner occupancy level. The simple fact is if you’re applying for a convention loan with less then 20 % down payment you will need mortgage insurance. Now days most Mortgage Insurance companies are now requiring a 70% owner occupancy level in the condo complex or building.
My guess is that there are maybe 15% of all San Diego condo projects that have over 70% owner occupancy levels
VA and FHA loans require a minimum of 51% owner occupancy rate
What is Owner Occupancy Level? It’s the number of condos actually occupied by the owners themselves vs. the condos that are investment properties which have been rented out. The Lenders and MI companies view having a high owner occupancy level as advantages because it’s their belief that owners will take better care of the complex than a Renter would thus maintaining the condo project at optimum levels .
Most of the management companies who provide the occupancy rate to the Home Owners Association track the ratio by determining that who ever gets their mail at an off site address, other than the subject condo, is an non-owner occupant (Renter).
Management companies need to reassess on how they calculate owner occupancy, many times owners who use the condos as a 2nd homes (vacation homes) or use P.O. boxes do not have their mail delivered to the subject condo but to their main residence or boxes. This makes sense if you like your mail delivered in a timely fashion. Here lies the problem.
2nd homes qualify as owner occupant, so saying that, using the mail to determine owner occupancy is flawed.
Many times the management company are supplying inaccurate information to the lenders, lowering the owner occupancy rate by default
This directly affects the Seller trying to sell his condo and the Buyer trying to obtain a loan.
This needs to change, Home Owners Associations need to require management companies to change their system of calculation and develop a more accurate way to determine owner occupancy levels that are fair and correct. It’s in the best interest to everyone concerned.
Prices are good, mortgage rates are good, basing a loan application on owner occupancy levels using a flawed system is not.
Steven Gluyas is a San Diego Realtor with 15 years experience specializing in San Diego Condos