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B2-1.1-01, Occupancy Types (11/04/2026)

Introduction
This topic contains information on occupancy type requirements, including:

Overview

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

Principal Residence Properties

A principal residence is a property that the borrower occupies and uses as their primary residence within 60 days after execution of the applicable security instrument. The borrower must continue to occupy the property for at least one year after the date of occupancy, unless otherwise permitted by the Selling Guide or the applicable security instrument. The following table provides additional requirements for determining whether a property is considered a principal residence. 

Borrower TypesRequirements for Owner Occupancy
Multiple borrowersOnly one borrower must 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 TransactionB2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction).
Military service members

A military service member who is currently on active duty and temporarily absent from their principal residence because of military service is considered an owner occupant.

Lenders must verify the borrower's temporary absence from the subject property by obtaining a copy of the borrower's military orders.

The military orders must evidence the borrower will be absent from the subject property as of the date the owner occupancy must be established as required by the security instrument.

Loans that meet these requirements must be delivered with Special Feature Code (SFC) 754.

Parents or legal guardian wanting to provide housing for their handicapped or disabled adult childIf the child is unable to work or does not have sufficient income to qualify for a mortgage on their own, the parent or legal guardian is considered the owner/occupant.
Children wanting to provide housing for parentsIf the parent is unable to work or does not have sufficient income to qualify for a mortgage on their own, the child is considered the owner/occupant.

Second Home Properties

The table below provides the requirements for second home properties.

✓A second home must ...
 be occupied and used by the borrower as a second home for some portion of the year.
 be a one-unit dwelling.
 be suitable for year-round occupancy.
 be under the borrower's exclusive control.
 

not be primarily used or operated as a rental property and must not be a timeshare arrangement.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).

 not be subject to any agreement that gives a management firm control over the occupancy of the property.
 be underwritten through DU and receive an Approve/Eligible recommendation, except for high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification PathB5-7-03, High LTV Refinance Alternative Qualification Path).

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 a property that is not occupied by the borrower as a principal residence or second home. A property must be delivered as an investment property when the requirements for principal residence or second home occupancy are not met, including when the property is primarily held or operated as a rental property. An LLPA applies to all loans secured by an investment property. 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.

Loans secured by an investment property must be underwritten through DU and receive an Approve/Eligible recommendation, except for high LTV refinance loans that are required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification PathB5-7-03, High LTV Refinance Alternative Qualification Path).

 

Defining Occupancy for a Group Home

Eligibility and pricing for group homes are based on the applicable requirements above for principal residences, second homes, or investment properties, depending on the occupancy status of the borrower(s).

Investment properties that are or will be leased to business entities for use as group homes are eligible for purchase by Fannie Mae, provided that all borrowers are individuals.

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).

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

AnnouncementsIssue Date
Announcement SEL-2026-10 November 4, 2026
Announcement SEL-2022-09October 05, 2022
Announcement SEL-2022-05June 01, 2022
Announcements SEL-2021-11December 15, 2021
Announcement SEL-2021-03April 07, 2021
Announcement SEL-2019-04May 01, 2019
Announcement SEL-2019-02March 6, 2019
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