Mortgage Occupancy Types

Principal residence

A principal residence is normally the home a borrower occupies as the primary residence. In a transaction with multiple borrowers, program rules may permit one borrower to occupy and take title. Special provisions may also apply to active-duty military members who are temporarily absent, or to certain family arrangements involving a dependent adult child or a parent who cannot qualify independently.

Second home

A second home generally must be a one-unit dwelling suitable for year-round use. The borrower must occupy it during part of the year and retain control over it. A property operating as a timeshare or controlled by a management agreement is generally not treated as a second home. Rental income identified from the property may be subject to specific treatment and ordinarily cannot be used for qualification merely because the property is called a second home.

Investment property

An investment property is owned but not occupied by the borrower. Conventional investment-property loans commonly involve additional pricing adjustments, reserve requirements and underwriting analysis. Rental-income documentation and the borrower’s experience or existing financed properties may also matter.

Why accuracy matters

• Occupancy is stated in the application and security documents.
• The intended use must be honest and consistent with the transaction.
• Misrepresenting occupancy can constitute mortgage fraud.
• Plans can change, but the stated intent at closing must be genuine and supportable.

Questions to discuss

• How soon will you occupy the property?
• Will anyone rent it or operate a business from it?
• Is it a one-unit home, multi-unit property or group home?
• Will another borrower occupy the property?
• Do you already own or finance other real estate?