What occupancy types are typically considered in mortgage underwriting?

• A. Primary residence only
• B. Investment property only
• C. Primary residence, second home, and investment property
• D. Commercial property only

Answer: (C)

Occupancy type in mortgage underwriting is about how the borrower will use the property, and this choice changes risk assessment, loan terms, and pricing. In residential lending, lenders categorize occupancy as primary residence, second home, or investment property. Each category has its own typical requirements—for example, primary residences usually have lower down payments and more favorable rates, while second homes and investment properties require higher down payments, tighter underwriting, and sometimes higher rates or more reserves—because the risk profile differs with how the property will be used.

That’s why the best answer includes all three categories. Limiting to just one occupancy type ignores the other common scenarios lenders encompass. Commercial property is handled in a different, commercial-lending framework and isn’t part of standard residential occupancy underwriting.