Financing a rental by calling it primary residence?

Question

I am having trouble getting a mortgage due to my debt to income ratio. I am looking to purchase my second investment property. I own my first one outright, and I can't even get a cash-out loan. Excellent credit, enough for down payment, but student loans have slaughtered my debt to income ratio.

Could I finance an investment property by claiming that my intention is to live there, and then pretend to live there for several years?

Anyone done this? Sounds like a bad idea, but I thought I'd throw it out there, see what responses I get.

Albert Bui · Answer

Those are just general guidelines since some banks have a 2 year requirement evidenced by the tax returns showing landlord experience for 2+ years. Freddie Mac requires 2 years Fannie Mae does not you can use rental income instantly as long as you have a signed lease agreement and can document you've deposited the security deposit into your checking account.

Sante R. · Answer

so at this point No bank loan...Looks like I'll have to continue with these lines of credit. My credit report is Very long with numerous accounts. I know sometimes this can hurt your credit

Sante R. · Answer

So then are you saying I'd have to wait 2 years before being able to acquire a bank loan ?  Wow, long time.  What about using a deed on one of the properties as collateral ? I really don't know how any of this works when it comes to rentals.  Can anyone give a little clarity. Thanks

Wayne Brooks · Answer

As said, don't try it.  Also, you still have the DTI requirements for a personal residence loan.

Steve Babiak · Answer

Once you can show income from the existing rental property on two tax returns, a lender should be willing to count the rent from your new acquisition as income; that could help your DTI at that point.

James Wise · Answer

Don't do it. You could get into a lot of trouble.

If you have the down payment but can't get the loan why not add another partner onto the deal so you could use their income as well.

Albert Bui · Answer

If you structure things right you may be able to utilize your current income and potential rental income in the market to be able to purchase another property depending on how much capital you have to purchase your next property.

If you purchase and do not live in the property but claim primary you're committing mortgage fraud which is a min penalty of up to 100,000 and or both 10 years in federal prison. So I would recommend you satisfy the requirements of primary residence of 12 months of actually living in the property if you do claim it. Then you can move out after and it would be fine.

Financing a rental by calling it primary residence?

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