When purchasing a home, you have to determine if the house will be a Primary Residence, Second Home, or Investment Home. This determination affects the underwriting guidelines, and can impact the rate and terms of an approved loan. For this reason, it is important to understand the differences between these three property types.

The easiest to distinguish is a Primary Residence. A Primary Residence is simply the house where you will be spending the majority of your time living. This can be tricky for some people, who split time evenly between two properties (such as snowbirds or people who work in two locations), but for the vast majority of buyers, the Primary Residence is the place you call “home.” If you are in a unique situation where you have 2 potential Primary Residences, you probably have one which you would designate as your “primary” home. And if you don’t, you can discuss your situation with a qualified loan officer, who can help you determine which home your Primary Residence is.

Second Homes and Investment Homes, then, are properties purchased in addition to a Primary Residence. A Second Home is any property you purchase which you do not plan to rent out for income purposes and has different amenities than your Primary Residence. This could be a lake house in Traverse City or a hunting cabin in the Upper Peninsula. Second homes are simply homes with your stuff in them that you visit from time to time, but do not generate rental income. Investment Homes, on the other hand, are properties you own with the intention of renting them out for income.

And that’s pretty much it. Everyone has a Primary Residence. Anything beyond your home will be a Second Home if you occupy it or an Investment Home if you receive income from it.

If you are looking to buy a new house of any kind, please contact me so that I can help you through the preapproval process. And if you have anything to add about the differences between these property types, please leave a comment.