Primary Residence Mortgage

4 Replies

I have a client who just recently bought his first home and now wants to rent the home, as his parents are moving to Florida by years end and don't want to sell their home. He will live in their nicer more updated home and rent his recent purchase. He is cocerned about the mortgage stipulations and someone (the mortgager) coming after him. I dont want to give bad info in case their may be some repercussions. 

What should he do?

@Barshay Graves  How would the mortgage company know he has moved?  What exactly was the mortgage stipulation?  I have heard of some requiring a year at the house, but that is pretty rare.  Most just require that you intend to owner occupy at the time of closing, which it sounds like he did.  Has he been living in the home?

It should be fine. I have not heard of a mortgage stipulation allowing a bank to accelerate a loan because it went from owner occupied to non-owner occupied. The only problem I can think of is if it was an FHA owner occupied loan which goes into short sale or foreclosure; because it can be potentially considered fraud since the loan is for owner occupied not investment. But as long as he continues making the payment to the mortgage company and avoid default, your client should be okay.

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Originally posted by @Barshay Graves:

I have a client who just recently bought his first home and now wants to rent the home, as his parents are moving to Florida by years end and don't want to sell their home. He will live in their nicer more updated home and rent his recent purchase. He is cocerned about the mortgage stipulations and someone (the mortgager) coming after him. I dont want to give bad info in case their may be some repercussions. 

What should he do?

Can you provide more details on the mortgage itself. As mentioned earlier, FHA/VA have certain owner occupancy restrictions. What type of loan is it, what were the stipulations in the loan for owner occupancy if any?

More generally, his promissory note should outline any occupancy restrictions.  he should read it.  If it has occupancy restrictions, then he should comply.

The lender will find out its no longer owner occupied when the insurance changes from a homeowners policy to a landlord policy.  If he's renting it he absolutely wants a landlord policy.  A homeowners policy may refuse to pay a claim when they find out its rented.