Primary Home Status

Primary Home Status When Qualifying For Mortgage

Gustan Cho Associates are mortgage brokers licensed in 48 states

This BLOG On Primary Home Status When Qualifying For Mortgage Was UPDATED On January 8th, 2019

What is the basic status of your home when you qualify for a mortgage?

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. In this article, we will cover and discuss primary home status versus second and/or investment home financing when qualifying for a mortgage.

Government Loans

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

How Lenders Classify Owner Occupant Versus Non-Owner Occupant Properties

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

  • That is why government loans do 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 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 a 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 Versus Primary Home Status

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

  • With conventional loans, there is a minimum 3% down payment on a home purchase for first time home buyers
  • Conventional home loans require a 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

What is the mortgage interest rate for conventional loans?

Conventional Loans have three different types of loans programs:

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

Down Payment Guidelines On Primary Versus Investment Homes

Mortgage Rates and down payment requirements differ on the above three different types 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

Who is the main homeowner? Upgrade to another home and sell the primary home after moving house

Many homeowners are faced with 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 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.

Making Case For Primary Home Status

What are some scenarios for this Primary Home Status 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
  • The explanation can be that the home buyer is intending on selling a first primary home after moving into 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 downsizing 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

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 us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at We are available 7 days a week, evenings, weekends, and holidays.

This BLOG On Primary Home Status Was UPDATED On January 8th, 2019

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