Primary Home Status When Qualifying For Mortgage

Primary Home Status When Qualifying For Mortgage

This BLOG On Primary Home Status When Qualifying For Mortgage Was UPDATED On November 13th, 2017

When a mortgage loan borrower applies for a residential mortgage home, there are three statuses.

  • Primary home
  • Second home
  • Investment home

All government loan programs are for primary home status only. Second homes and investment home loans do not qualify for any government loan programs.

The following are government loans:

  • FHA Loans
  • VA Loans
  • USDA Loans

FHA, VA, and USDA insured mortgage loans are only available for primary homes. These three government loan programs are not available for second and investment homes.

How Lenders Classify Owner Occupant Versus Non-Owner Occupant Properties

Mortgage Lenders view owner occupant properties as less risk than second homes and investment property financing.

  • That is why government loans does not allow second home and investment property mortgage financing.
  • If a home buyer is buying a similar and like home they are exiting less than 100 miles away, most mortgage lenders will view this as an investment property.
  • However, if a home buyer is exiting their current property and buying a second home due to a job relocation, then the buyer can make a claim that they are buying the second home as an owner occupant property. Same with buying a second home.
  • If a home buyer is buyer a second home down the block from where they live, it will not be considered a second home but rather an investment home. However, is a home buyer is buying a beachfront condo such as a condotel unit, then the buyer can justify that they are buying a second home.

Second Homes And Investment Property Financing

Fannie Mae and Freddie Mac does allow second home financing and investment mortgage loans besides primary home loans.

  • With conventional loans there is a minimum 3% down payment on home purchase for first time home buyers
  • Conventional home loans require minimum of a 5% down payment is required for a primary home loans
  • 10% minimum down payment is required for second home financing
  • 15% to 20% minimum down payment is required for investment homes

Mortgage Rates On Conventional Loans

Conventional Loans have three different types of loans programs:

  • Primary residence mortgage loans
  • Second home financing
  • Investment property mortgages

Mortgage Rates and down payment requirements differ on the above three different type of property type financing.

  • Mortgage rates are the lowest for primary home loans
  • Second home loan mortgage rates are slightly higher than primary home mortgage rates
  • Investment home mortgage rates are normally the highest 

Primary Homeowner Upgrading To Another Home And Selling Primary Home After Moving

Many homeowners are faced in a dilemma where they already own a primary residence but want to relocate and purchase another home to be their primary residence. However, they do not want to sell their current primary residence until they move into their new primary home purchase.

  • These home buyers are told many times by mortgage lenders that if they purchase another home without selling their current primary residence, that they would only qualify as an investment home
  • They were told they need to put a larger down payment and accept the higher investment home mortgage rates on their second primary home purchase
  • However, as long as the deal makes sense, the second primary home purchase can be financed as a primary home with the lower down payment and lower mortgage interest rates

What are some scenarios for this case scenario to make sense.

  • If the new home purchase is larger than 25% in square footage, the home buyer is upgrading
  • So this makes sense to be classified as a primary home
  • Mortgage Borrowers can write a letter of explanation and explain the reason they are upgrading to a larger home
  • It can be due to lack of space and the explanation can be that the home buyer is intending on selling first primary home after moving in to the new second primary home after moving
  • This will qualify the home buyer for a primary home mortgage loan on the second home purchase
  • Home Buyers are moving from a large home to a smaller home like a townhome or condominium, the home buyer can be down sizing since their kids are grown up and are empty nesters  
  • This case scenario makes sense and a good letter of explanation would be sufficient to qualify for a primary home residential loan versus an investment home loan.

Mortgage Borrowers who need to qualify for a second home that will become their primary residence but are having a difficult time with their current lender can contact The Gustan Cho Team at 262-716-8151 or email us at We are available 7 days a week, evenings, weekends, and holidays.

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