HUD-Insured Mortgage

• Eighty percent of a condominium's units must be owner occupied before the Department of Housing and Urban Development, or HUD, can insure the mortgage on any additional units in the condominium. This rule only applies to HUD-insured mortgages. If a condominium owner wants to get private mortgage insurance, that insurance company determines how many units must be owner occupied.
  
  

Investors vs. Owners

• Owner-occupied means that the owner lives in the unit, as opposed to investment condos, which investors purchase to sell to others. Since HUD can't violate the 80 percent rule, it can't back mortgages for investors if it hasn't already backed a sufficient number of mortgages in the condo for owners. For example, if HUD has backed three mortgages in a condo for owners, it can't back a mortgage for an investor unless it first backs another mortgage for an owner. Otherwise, only three out of four mortgages, or 75 percent of mortgages, would be owner occupied.
  
  

Waiting List

• If an investor applies for a HUD mortgage and the owner occupancy rate in the condo is too low, HUD can't approve the mortgage. However, HUD doesn't completely reject such applicants. Instead, it returns the application to the applicant and puts the applicant's name on a waiting list. If, in the future, HUD backs enough owner-occupied mortgages that it can accept an investor mortgage, it contacts people on the waiting list in chronological order.
  
  

Other Programs

• Although HUD requires 80 percent owner occupancy, other loan programs may have a lower occupancy requirement. At the time of publication, the Federal Housing Administration, or FHA, has lowered its owner occupancy rate from 50 percent to 30 percent. Thus, if an investor can't get a HUD-insured mortgage on his condo, he may be able to get an FHA mortgage.