Selling Guide

Published October 7, 2020

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B2-1.1-01, Occupancy Types (05/01/2019)

Introduction

This topic contains information on occupancy type requirements, including:

 

Overview

Fannie Mae purchases or securitizes mortgages secured by properties that are principal residences, second homes, or investment properties. For the maximum allowable LTV/CLTV/HCLTV ratios and representative credit score requirements for each occupancy type, see the Eligibility Matrix.

 

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 to the property, except as otherwise required for mortgages that have guarantors or co-signers. (See B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction.)
Parents or legal guardian wanting to provide housing for their handicapped or disabled adult child If the child is unable to work or does not have sufficient income to qualify for a mortgage on his or her own, the parent or legal guardian is considered the owner/occupant.
Children wanting to provide housing for parents If the parent is unable to work or does not have sufficient income to qualify for a mortgage on his or her own, the child is considered the owner/occupant.

 

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

The table below provides the requirements for 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 arrangement1
  cannot be subject to any agreements that give a management firm control over the occupancy of the property

For additional guidance on entering housing expenses in DU for second home properties, see the related DU Job Aid.

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

 

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. See the Loan-Level Price Adjustment (LLPA) Matrix.

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.

 

1

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).

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