How long does a lender usually want a borrower to live in a primary residence before they move out and make it a rental property, (in order to keep the lower primary-residence loan rate)?
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
5y
@Karine Arditi No, as long as you have a legitimate reason for moving to a new primary you’ll be fine. Any issues would arise when you go to get approved for your next primary residence. If you’re obviously hopping from property to property for no good reason other than to take advantage of primary residence rates to build a portfolio and not fulfilling occupancy requirements, you likely will not get approved by the bank for your next primary residence.
If it is a conventional or FHA loan, you'd be looking at 1 year of living in the residence before moving out and making it a rental. Portfolio lenders may have their own requirements.
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
5y
@Karine Arditi Generally you must certify that you will occupy the property for one year after closing. However if life circumstances change, such as relocating new job, change in a family size etc., you shouldn’t have any issue buying a new primary.
Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes
5y
@Karine Arditi No, as long as you have a legitimate reason for moving to a new primary you’ll be fine. Any issues would arise when you go to get approved for your next primary residence. If you’re obviously hopping from property to property for no good reason other than to take advantage of primary residence rates to build a portfolio and not fulfilling occupancy requirements, you likely will not get approved by the bank for your next primary residence.
As a whole, the lender can't "revoke" the rate. The terms of the loan are the terms of the loan. Other than the usual 1yr residency requirment as stated many times above, just changing the use of the property doesn't/shouldn't invalidate your loan. In general, its there for its term until YOU decide to change it. Good luck.
As a whole, the lender can't "revoke" the rate. The terms of the loan are the terms of the loan. Other than the usual 1yr residency requirment as stated many times above, just changing the use of the property doesn't/shouldn't invalidate your loan. In general, its there for its term until YOU decide to change it. Good luck.
Thank you. Are there potential consequences for when I look into my next loan?
Other than your debt-to-service-ratio stuff, no... They are separate deals. When you look at your next loan, they can't "go back" and modify your last loan. Or think of it this way... Once the loan is signed/completed, it cant just be modified. That's basically doing a refinance in which case you are getting a new loan.
Lender · Pasco, WA · Member since 2020 · 84 posts · 50 votes
5y
That should answer a lot of your questions, but in regards to getting in trouble for not living there for a year...
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The servicer would have the burden of proof to prove that you planned on committing mortgage fraud prior to origination. They would have to find texts/emails prior to closing or other statements that you had planned on moving out. The worst they can do is call the loan due. They can't change the terms of the loan, so they can require it to be paid in full within a certain amount of time, so you can refi or sell the place.
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Obviously that's the worst case scenario, and very costly for both sides. Why would they want to do this? Well... If you're not making your payments, they can investigate. Otherwise, why would they want to go through that hassle?
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Obviously, this isn't to say that you should do it - by no means am I advocating for it. But don't be super worried if you don't end up living in the property for 12 months. It should be really easy to blame it on changes in life circumstances.