The property

Property & occupancy types

What you're buying and how you plan to use it both change your loan terms — sometimes significantly. Here's how lenders think about it.

Occupancy: how you'll use the property

• Primary residence — where you actually live. Gets the most favorable rates and the lowest down payment options of the three.
• Second home — a property you personally use part of the year but don't live in full-time. Must be a one-unit property only; a multi-unit "vacation home" gets classified as an investment property instead, regardless of intent. You can't rent it out full-time, hand control to a rental management company, or use projected rental income to help you qualify.
• Investment property — not occupied by you at all. Comes with higher rates and larger down payment requirements, but rental income can be used to help you qualify under the right documentation (see the REO section above for the rules on that).

Unit count: 1-4 units vs. 5+

Standard residential mortgages — Conventional, FHA, VA — cover properties with 1 to 4 units: a single-family home, a duplex, a triplex, or a fourplex. You can even live in one unit as your primary residence while renting out the others — a common strategy for offsetting your own housing cost.

Anything with 5 or more units is classified as commercial real estate, not residential — it requires an entirely different type of commercial loan with its own underwriting process. It's a different product category altogether, not something a residential pre-qualification covers.

Condos

Condos go through an extra layer of lender review beyond the property itself: the lender needs to confirm the HOA's financial health, insurance coverage, owner-occupancy ratio, and whether the association is involved in any litigation. This can add time, so factor it into your timeline.

There's often an upfront cost for this: the condo questionnaire and HOA documents your lender needs typically come with a fee charged directly by the HOA or its management company. That fee is set by them, not your lender, and it's due whether or not your loan ultimately closes.

Approval requirements also vary by loan type: FHA requires the project itself to be on FHA's approved list (or qualify through a single-unit approval path), while VA requires the entire project to be VA-approved with no equivalent shortcut.

Manufactured homes

These require additional documentation most other property types don't: proof the home is permanently affixed to its foundation (often a licensed engineer's certification), and verification of its HUD certification label.

The title also has to be handled correctly. Manufactured and mobile homes can be registered like a vehicle through the DMV. If that's the case, the seller needs to retire that title so the home is legally reclassified as real property before your loan can close.

The engineer's foundation report comes with its own fee, separate from your other closing costs. Whether the buyer or seller covers it should be negotiated at the time of contract. Make sure your realtor or real estate agent raises this early and puts it in writing in the purchase contract.

Townhomes

Usually simpler than a condo — typically fee-simple ownership of the land under your unit, even though it's attached to neighbors. Still may involve HOA dues if part of a planned community, but generally without the intensive project-level review a condo requires.

Co-ops — a genuinely different structure

Buying a co-op isn't buying real property at all. You're purchasing shares in a corporation that owns the entire building, plus a proprietary lease giving you the right to occupy your specific unit. Because of that, financing isn't a traditional mortgage — it's a "share loan," and far fewer lenders offer them. Co-ops are heavily concentrated in certain markets (New York City especially).

The bigger difference: you need two separate approvals to buy one — your lender's, and the co-op board's. The board conducts its own background check, interview, and financial review, and its requirements are often stricter than what your lender would otherwise approve. A strong loan approval doesn't guarantee the board says yes.

Unique or unconventional builds

Log homes, earthen construction, geodesic domes, barndominiums, and similar unconventional builds can face real financing friction — mainly because appraisers need comparable recent sales to establish value, and unique properties often don't have many nearby. Some lenders restrict or decline these property types entirely, or require a specialized appraiser experienced with that construction type. If you're considering something unconventional, it's worth confirming financing is realistic before you get attached to the property.

Inspections & appraisal

Four separate checks happen on the property itself. They answer different questions, and only one of them is done for you.

Inspection vs. appraisal

• The inspection is for you. You hire the inspector, you pay, and the report is yours. It tells you the condition of the home. Lenders generally don't require one.
• The appraisal is for the lender. The lender orders it, you usually pay for it, and it confirms the home's value supports the loan. An appraiser notes obvious problems but is not inspecting the home for you.

Inspections worth knowing about

• General home inspection: structure, roof, electrical, plumbing, heating and cooling.
• Termite or wood-destroying organism inspection: common in the Southeast, and required on some loans and in some areas.
• Septic and well: for homes not on public sewer or water.
• Specialists: roof, foundation, sewer line camera, mold, radon or pool, when the general inspection or the home's age suggests it.

Your contract sets a deadline for inspections. Within it you can usually ask for repairs, ask for a credit or price reduction, accept the home as it is, or cancel. After the deadline, those options narrow sharply.

Who orders the appraisal, and why nobody gets to pick the appraiser

Your lender orders the appraisal, usually after you have a signed contract and have told the lender you want to move forward. You pay the fee, and you are entitled to a copy of the report.

The appraiser is deliberately kept at arm's length from everyone who benefits from a high or low value. Federal appraiser-independence rules bar you, the seller, both real estate agents and your loan officer from choosing the appraiser or pressuring them about the value. To keep that separation, most lenders place the order through an appraisal management company or a separate in-house appraisal desk, which assigns a licensed or certified appraiser from an approved list. Your agent can meet the appraiser at the home and hand over information such as recent comparable sales and a list of upgrades. What no one may do is ask for a particular number.

How the appraiser is assigned, and what they must check, depends on the loan type:

How an appraisal reaches a value

For most homes the appraiser compares yours with similar homes sold recently nearby, then adjusts for differences such as size, condition, lot and upgrades. On conventional loans the appraisal must be dated within 12 months of closing and needs an update once it's more than four months old.

• FHA: the appraiser also checks basic safety, soundness and security. Issues such as peeling paint on older homes, missing handrails, or a failing roof may have to be repaired before closing. An FHA appraisal is valid for 180 days and stays with that FHA case number. Your contract must include the FHA amendatory clause, which lets you cancel and keep your earnest money if the home appraises below the price.
• VA: the home must meet VA's Minimum Property Requirements. If the value looks like it will come in below the contract price, the appraiser must give notice first and allow two working days for additional comparable sales to be submitted. This is often called the Tidewater process.
• If you think the value is wrong: on conventional loans you may ask your lender for one reconsideration of value per appraisal, with up to five comparable sales, before closing. FHA handles this through the underwriter. See Underwriting for your options when an appraisal comes in low.

Homeowners & flood insurance

Insurance is required before closing, and its cost is part of your monthly payment.

Homeowners insurance

Your lender requires a policy in place at closing, with the first year usually paid up front. Start shopping as soon as you're under contract. The premium is part of your monthly payment and your debt-to-income ratio, so a high quote can affect your approval. In some areas, especially coastal and storm-prone ones such as parts of Florida, Texas, Louisiana and the Carolinas, or wildfire areas in the West, the age of the roof and wind or fire coverage can decide whether a home is insurable at a reasonable price.

Flood insurance

• Standard homeowners policies do not cover flood damage.
• If the home is in a Special Flood Hazard Area, flood insurance is required for most mortgages.
• The National Flood Insurance Program covers a single-family home up to $250,000 for the building and $100,000 for contents. Private flood policies are also available.
• The usual 30-day waiting period doesn't apply when you buy the policy as part of getting a mortgage.
• The federal program depends on Congress renewing it, and it lapsed briefly twice in the past year. A lapse can delay closings in flood zones, so order the policy early.

Title & survey

The title search looks for anything that could cloud your ownership: unpaid liens, unpaid taxes, errors in past deeds, or other people's claims. Problems have to be cleared before closing.

• Lender's title policy: usually required. It protects the lender only, not your equity.
• Owner's title policy: optional. It protects you if a covered title problem surfaces later. It's normally a single premium paid at closing.
• Survey: shows boundaries, easements and encroachments. Whether one is required depends on your state, lender and title company.

Who customarily pays for the owner's policy, buyer or seller, varies by state and even by county, and it's negotiable in the contract.