Primary Residence

What It Means

A primary residence is the property where the owner lives for the majority of the year and considers their principal home. Lenders, tax authorities, and insurance providers each use primary residence status to determine eligibility for favorable loan programs, tax deductions (such as the mortgage interest deduction and capital gains exclusion), and homeowners insurance rates.

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In co-buying, primary residence classification is determined by whether at least one Co-borrower will occupy the property. When at least one borrower qualifies as an occupant, the group generally accesses primary residence loan terms — even if other co-owners are Non-occupants.

How Primary Residence Status Affects Co-buyers

Primary residence loans typically offer the most favorable financing terms available: lower Down Payment requirements (as low as 3%–3.5% on conventional and FHA loans), lower interest rates, and access to government-backed loan programs. These advantages make primary residence classification a significant factor in co-buyer group planning.

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Lenders typically require occupant borrowers to move in within 60 days of closing and maintain the property as their primary residence for at least one year. If no co-borrower intends to occupy, the property is classified as an Investment Property — which carries materially different loan terms.

Why It Matters for Co-owners

Primary residence status has implications beyond financing. Tax benefits such as the mortgage interest deduction and the capital gains exclusion at sale may be available to occupant co-owners but not to non-occupant co-owners — co-owners should consult a tax professional to understand how each party's occupancy status affects their individual tax position.

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The Co-ownership Agreement should document each co-owner's intended occupancy status, define what happens if an occupant co-owner moves out (potentially affecting the property's classification for future Refinancing), and address how tax benefits are allocated among the group.

Key Points

• The property where the owner lives most of the year and considers their principal home
• At least one co-borrower must typically occupy the property to access primary residence loan terms
• Typically offers the most favorable financing: lower down payments, lower rates, and broader program access
• Occupant borrowers generally must move in within 60 days and stay at least one year
• Tax benefits may differ between occupant and non-occupant co-owners
• The Co-ownership Agreement should define occupancy expectations and address classification changes