Author Topic: getting a mortgage--- owner occupied vs investor, 12 month guideline  (Read 372 times)

uniwelder

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There's a house in mind that my wife and I may buy and wonder if we might be able to apply for the mortgage as owner-occupied?  We have three others that we rent out, plus the one we live in, all within 15-30 minutes of each other.  These are the properties----

1) current home--- want to sell and put on market March/April, finishing work on it now, located in a slow turnover area so it may not sell until summer, has a substantial HELOC as primary residence
2 + 3) rentals in college town that are currently occupied, one has a commercial loan on it, the other has no liens
4) dream house we bought early this past year, has a 30 year investment mortgage on it, currently being rented out but we plan to move in late summer (current lease ends June 1st, but may agree to extend a month or two) and refinance as our primary home.  This house happened to come up unexpectedly, so we bought it while we had the chance, but weren't ready to sell our primary home yet.
5) house we may buy, located in same college town as #2+3.

This may seem a bit convoluted and needlessly complex, so let me know what you think.  In the spring, we're looking to sell the house we live in and considering to move into the new house for a bit.  Since the new house is in a college town, most leases change over in the summertime.  We could find someone non-university related to rent it earlier, but the pool of people would be smaller.  For sake of finishing work on our primary #1 home to sell and having it empty for showing, we're thinking about moving into the prospective #5 house, and then moving into the dream #4 house later in the summer.

I know the guidelines say that for an owner-occupied mortgage, you're supposed to plan on living in the home for at least 12 months.  In our case, we're expecting that may be 6-8 months, plus for the number of rentals we currently have, I don't know if a mortgage lender would be suspicious.  Are there any repercussions for applying as owner-occupied in a case like this?  What about when we move to the dream #4 house and want to refinance within a year of having just obtained a different owner-occupied mortgage? I'm usually very honest, but it seems like this could be a gray area.  Worst case scenario, we end up with an investor mortgage on house #5 and pay a little more.

Also, does the current HELOC on our primary home factor in any way?  It would be paid back upon sale of our current home.  I just didn't know if the current lien would affect getting an owner-occupied mortgage on this new house.


Aegishjalmur

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Re: getting a mortgage--- owner occupied vs investor, 12 month guideline
« Reply #1 on: October 19, 2020, 03:15:36 PM »

 Getting an owner occupied mortgage knowing you will not occupy it for the full period required by the owner occupancy agreement is potential mortgage fraud. If the bank figures it out they can call the mortgage due in full, plus potential penalties and jail time.

More likely scenario is lender will deny the owner occupied loan and require you to do as an investment.

No, Heloc will not have any impact, it's just another debt.




« Last Edit: October 19, 2020, 03:24:02 PM by Aegishjalmur »

uniwelder

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Re: getting a mortgage--- owner occupied vs investor, 12 month guideline
« Reply #2 on: October 19, 2020, 04:33:39 PM »
Thanks Aegishjalmur, I've read through your other mortgage related posts---- you seem to have a wealth of information in this area. 

Aegishjalmur

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Re: getting a mortgage--- owner occupied vs investor, 12 month guideline
« Reply #3 on: October 21, 2020, 10:52:41 AM »
Thanks Aegishjalmur, I've read through your other mortgage related posts---- you seem to have a wealth of information in this area.

No problem.

I worked mortgage for 13 years so picked up alot of info. Started with a home builders in house mortgage co and then worked for one of the biggest mortgage lenders in the country. Worked everything from conventional, VA FHA to USDA  and 203K(Reno) loans. So I am well aware of how frustrating, draconian and confusing the mortgage rules and processes are(even to those who work with them).

I've been working on and off on a 'Mortgage for Non Underwriters'  guide explaining some of the 'why' behind the rules. When I get that bit further long I'll probably start posting it in sections.

Finances_With_Purpose

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Re: getting a mortgage--- owner occupied vs investor, 12 month guideline
« Reply #4 on: October 25, 2020, 03:41:18 PM »

 Getting an owner occupied mortgage knowing you will not occupy it for the full period required by the owner occupancy agreement is potential mortgage fraud. If the bank figures it out they can call the mortgage due in full, plus potential penalties and jail time.

More likely scenario is lender will deny the owner occupied loan and require you to do as an investment.

No, Heloc will not have any impact, it's just another debt.

This.  The guideline is for people whose situations change, not people who know going into it that they're misrepresenting what type of loan they actually need.  Misrepresenting is called fraud.  You don't want to commit fraud.  Just not worth it. 

Sounds like may just be bad timing anyway with as many other irons as you already have in the fire...