- The property is occupied by the owner for the majority of the year, and is usually the address of record for such items as tax returns, bank statements, paystubs, etc.
- This property may not be occupied by a tenant
- Rates are the lowest for this type of occupancy and risk adjustments are minimal since it is the main residence of the borrower.
- The property is occupied for some portion of the year by the owner and cannot be occupied by someone other than the owner.
- The property has some type of vacation feature, ie. cooler/warmer climate, located in the country, pines, or by the ocean, etc.
- It may not be a rental property
- Must be located a reasonable distance from the primary residence – usually 50 miles or more.
- Occupancy type must make sense. IE. Having a primary residence on the east side of town and attempting to have a 2nd home on the west side of town just does not make sense.
- Rates are about the same for a 2nd home as a primary residence. A larger down payment is required and underwriting guidelines are a bit more stringent.
- The property is usually rented and not occupied by the borrower. I have seen situations where the borrower plans to live in the property, however due to proximity to the current residence, the underwriter will only approve the loan as an investment property.
- The property is primarily considered an income source whether rented with a tenant or being renovated to flip for a profit.
- Rates for an investment property are higher. Usually a minimum down payment of 20% is required. Underwriting guidelines are definitely more stringent due to the level of risk for the investor.