When qualifying for a mortgage loan, a borrower must indicate one of three occupancy types; a primary residence, a secondary residence, or an investment property.
The purpose of the home will largely determine the required down payment, interest rate obtained, and loan program eligibility.
A primary home must be occupied by at least one of the borrowers for the majority of the calendar year. When purchasing using an FHA loan, you are required to bring 3.5% of the purchase price as down payment. A VA or Rural Housing (USDA) loan will qualify you for 100% financing of the purchase price. Other financing options, such as a conventional loan, require anywhere from 5% – 25% of the purchase price as a down payment, depending on your credit score, county, property type and loan amount. To learn more about your specific qualifications, call or click here to talk to a loan expert.
A secondary home must be suitable for year round occupancy. The home cannot have been purchased as an investment loan and cannot have a lease agreement if refinancing. Typically a 10% down payment is required to qualify for a second home loan purchase, and you must have 25% equity for a refinance.
Investment properties are utilized for rental income purposes and are not occupied by the home owner. Down payments range from 20-25% depending on the number of units being purchased. To qualify for a loan for an investment property with 2-4 units, you must have at least 30% down payment, otherwise recognized as a 70% or under loan to value.