What does owner-occupied mean in terms of mortgage qualification?

In mortgage qualification, the term "owner-occupied" specifically refers to a property in which the borrower intends to live as their primary residence. This classification is crucial because it can influence the terms of the mortgage, including interest rates, down payment requirements, and eligibility for various programs. Lenders often view owner-occupied properties as lower risk compared to those that are investment properties or vacation homes, which motivates them to offer more favorable loan conditions.

When a borrower intends to occupy the home as their principal dwelling, they are typically seen as more committed to maintaining the property and meeting mortgage obligations, thus presenting a lower risk of default. This is why understanding the definition of owner-occupied properties is essential for both lenders and borrowers in the mortgage qualification process.