Introduction
Principal Residence Properties
A principal residence is a property that the borrower occupies as his or her primary residence. The following table describes conditions under which Fannie Mae considers a residence to be a principal residence even though the borrower will not be occupying the property.
| Borrower Types | Requirements for Owner-Occupancy |
|---|---|
| Multiple borrowers | Only one borrower needs to occupy and take title |
Parents or legal guardian wanting to | If the child is unable to work or does not have |
Children wanting to provide housing for | If the parent is unable to work or does not have |
Note: If a property is used as a group home, and a natural-person individual occupies the property as a principal residence or as a second home, Fannie Mae’s terms and conditions for such occupancy status as provided will be applicable.
Second Home Properties
Second Home Requirements
- must be occupied by the borrower for some portion of the year
- is restricted to one-unit dwellings
- must be suitable for year-round occupancy
- the borrower must have exclusive control over the property
- must not be rental property or a timeshare arrangement *
- cannot be subject to any agreements that give a management firm control over the occupancy of the property
* If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).
Investment Properties
An investment property is owned but not occupied by the borrower. An LLPA applies to all mortgage loans secured by an investment property. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction.
For borrowers who are natural-person individuals, eligibility and pricing for group homes will be the same as currently provided under the terms and conditions established for investment, second
home, or owner-occupied properties, depending on the particular occupancy status. For additional guidance on entering housing expenses in DU for investment properties, see the related DU Job Aid.