Hi,
I’m buying a duplex and am telling the bank I am going to live there. I plan on having a friend living in the unit that I am supposed to live in. My question is, how long do I have to tell them bank I’m living in the property, and what do I tell them when I wanna move out, but not sell the property?
If I buy the property as an investment property, it makes my down payment more and apr higher, so it’s my only real means of getting a rental property.
IMO BAD WAY to start…if you are going to be less than honest on this one, what about the rest of your real estate career…AND…what do you do when the bank discovers the fraud and either charges you or calls the loan all due and payable.
DO THE RIGHT THING…consider this…“If you can live WITH it…I am sure I can live WITHOUT it.”
The most accurate answer is that it depends on what the loan docs say. I bought a 4 plex 17 years ago this way with a HUD loan, lived in it for 2 months before moving out and renting it. I still own it, I still have the same loan on it, it has doubled in value, and my ARM rate is 2.25%, and it nets $1500/month plus appreciation. The only thing that mattered then was ‘intent’ to live in the property. The loan docs have changed since then, fact is they change frequently and they vary by Lender, so you have to read the loan docs. Do not be intimidated by those that think it is somehow cheating, the reason O/O rates are so much lower than NOO rates has much more to do with social engineering than is does with risk management.
Jack5 is correct in that it is all about intent.
You will have to tell the bank you are purchasing the property for personal occupancy. When a person buys a home to live in they do not specify to the bank as to how long they will be there as that is something no one knows when they buy.
If you obtain a mortgage under the pretense of the property being owner occupied while actually having the intent of moving out and turning the property into a 100% rental that is mortgage fraud. Banks tend to take a rather dim view of fraud.
It’s really up to you as to how much of a gamble you are prepared to take in starting out. Jack got lucky and if it works you are on your way but if you do get caught it will likely spell the end of your investing.
Why are you not planing to move into the duplex yourself as opposed to having a friend live there in your name. You will need to change your mailing address to the duplex anyway to get away with the scam otherwise the bank will probably find out. You may wish to think this plan through a little better before you proceed. Dumb criminals invariably always get caught.
when can I move out
Thank you Jack5.
as for the other two replies… I once flipped two properties that I only had under contact. I heard from others how I had to own property so long and I was going to jail for it… yes for flipping. I hear fraud? I’m buying the property, if I could do it under other means I would. To me this is the same as the flipping, it does not matter how long I own the property for.
When I first talked to the bank I told then I wanted to buy a duplex and live their til I got married, and then maybe just keep it, the banker said probably six months. A mortgage broker said there is no said date, but six months sounded fine. I’m not trying to fraud someone or rip someone off, I just have one small way to get one property.
Jay, Everybody has different moral and ethics values.
I’m buying a duplex and am telling the bank I am going to live there. I plan on having a friend living in the unit that I am supposed to live in
This says to me exactly what your intent is.
A HUGE PART of what got the industry in such a mess was people saying they could pay for someting that they could not…their “Intent” was to pay, but in reality their ability was not.
I have made tons of money in this business and ALWAYS been HONEST and up-front.
As to your flipping, I see nothing wrong with that as long as you inform the seller of your “Intent.”
As I said before. “If you can live with it, I can live without it.”
Do what your conscience and moral values dictate…only you can decide that.
You do not go to jail for flipping, you go to jail for fraud. Either you misunderstood those people, or they were misinformed.
As far as lying to the lender… FRAUD. They are asking you to put down more money to make the deal more secure. The APR is higher due to the increased risk of loaning on a rental property versus investment property.
I love Jack’s posts, but I don’t agree that NOO rates and down payments are higher due to social engineering instead of risk management. When push comes to shove, people will make the mortgage payment on the roof over their head before they make the payments on their rentals.
–Natalie
Good informative post Natalie-VA.
Normal foreclosure is:
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Commercial-Industrial Property.
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Rental Propertuy.
3…LAST…Personal residence.