Interest rates for a mortgage loan on a primary residence are usually lower than for a second home or investment property. There are rules about what constitutes a primary residence, and homeowners must abide by them by law.
If you want your home to be considered your primary residence, you must live there a majority of the time. Your home also must be considered a reasonable distance from your work, and you must move into it within 60 days of closing. If you decide to refinance, you must be able to prove you have been living there. Most of the mortgage loans homeowners apply for are for primary residences.
The reason interest rates are higher for second homes and investment properties is because these loans are riskier for mortgage lenders to approve. Setting interest rates is all about risk. That’s why if a mortgage applicant has a lower credit score and income, they may have to pay a higher interest rate. This could also be the result for an applicant with less available income who has made some late payments in the past. In these scenarios, there is more risk to the lender as these applicants may be less willing or able to make their mortgage payments on time.
Conversely, an applicant with more disposable income and a higher credit score is seen as more likely to make mortgage payments on time.
However, when an applicant subsequently wants to buy a vacation home or investment property, this inflates the risk.
To get a home loan on a primary residence, second home, or investment property in Allen, Texas, apply online at Supreme Lending.