Which occupancy-related condition tends to require a larger down payment?

• A. Owner-occupied properties always require larger down payments.
• B. Down payment is always the same regardless of occupancy.
• C. Non-owner-occupied properties are not eligible for down payments.
• D. Non-owner-occupied properties typically require larger down payments than owner-occupied properties.

Answer: (D)

Occupancy status changes the risk the lender takes on. A primary residence is seen as lower risk because the borrower typically relies on stable personal housing and is more likely to prioritize keeping that home current on mortgage payments. Non-owner-occupied properties, like rental investments, introduce more risk: vacancies, tenant issues, and market downturns can affect the ability to cover the mortgage. To compensate for that higher risk, lenders require a larger down payment to reduce the loan-to-value ratio and give a bigger financial cushion if trouble arises.

So, when the property is not owner-occupied, the typical expectation is a larger down payment than for owner-occupied homes. (Note: there are exceptions and specific programs, such as loans for primary residences with very low or zero down, but the general pattern is higher down payments for investment properties.)