When you buy a home, one often overlooked but critical document is the Primary Residence Certification, sometimes called an Owner Occupancy Affidavit. This form is your legal promise to the lender that the property you’re financing will be your primary home — the place where you will live most of the year.
Lenders prioritize loans for primary residences because these loans carry less risk. Homeowners tend to prioritize keeping their main home during financial hardships, reducing the likelihood of default. Because of this, mortgage loans for primary residences usually come with more favorable interest rates, lower down payment requirements, and sometimes more flexible credit qualifications compared to loans for investment or vacation properties.
By signing the Primary Residence Certification, you agree to occupy the home within a typical timeframe (usually 60 days after closing) and to maintain it as your primary residence for at least one year. This certification is part of the legal mortgage agreement and is often notarized.
If you falsely claim a property as your primary residence when it is intended as an investment, this constitutes occupancy fraud — a form of mortgage fraud with severe penalties. Lenders may call the entire loan due immediately, impose financial penalties, or initiate legal action, which can include criminal charges.
Understanding the difference between property types is essential. Primary residences benefit from lower mortgage rates and down payments and qualify for tax benefits like mortgage interest deductions and capital gains exclusions. Secondary homes and investment properties have stricter loan terms and fewer tax advantages. For more on property use classifications and occupancy verification, see Property Use Classification and Occupancy Verification.
If your circumstances change after signing — such as a job relocation — this is not automatically fraud. The key factor is your intent at the time of signing. Communicating changes with your lender promptly is advisable.
For tax considerations, the IRS requires you to have lived in and owned your primary residence for at least two of the five years before a sale to qualify for capital gains tax exclusions (up to $250,000 for individuals, $500,000 for married couples), as outlined in IRS Publication 523.
In summary, the Primary Residence Certification is a crucial step in your mortgage process that affects your loan terms and legal responsibilities. Honest disclosure ensures you receive the best possible mortgage deal while avoiding the risks of mortgage fraud.