Hello BP Community,

Looking to get some guidance/help.

So just to give a quick background of my dilemma:

I'm new to investing and am in the process of purchasing my first piece of investment real estate. For the financing part of this, I'm using a conventional loan with 5% down and paying all closing costs. On the loan documents, it will be classified as a second home and not as an investment property. After closing, there is a chance that I will do short term rentals (it's currently zoned for that) when I'm not using the property for myself. The bank is giving me a hard time about this - they're almost strong arming me into saying that I won't ever use it as an investment... just personal use only.

My question is this: Can the bank, after closing, perform a spot check to see what I’m using the home for? And let’s say that at that particular time, I’m doing a short term rental... can they sue me, terminate our loan agreement, etc.?

Any feedback would be greatly appreciated!

You are getting a 5% down loan instead of 20-25% down and a lower interest rate because it's NOT an investment property. That used to mean primary or vacation home, or maybe snowbird. They have to define those terms now, otherwise you "occasionally" rent it out, which to you means 300-350 days per year. Have you committed mortgage fraud? PROBABLY not.

I THINK, you would be safe if by “occasionally” you meant 2 weeks per year or less as some places consider that recreational rental and don’t even tax it. (Minneapolis during the gold tourney for example.)

They MIGHT be getting the same vibe I am from the way you phrase things. When you type “there’s a chance I MIGHT do STRs when I’m not using it.” Like me they’re hearing I WILL be doing STRs when I’m not using it. If that CHANCE is 100% you need to own up to that and say you will, not might. 

@Account Closed Fannie Mae allows for this.  This is from Fannie Mae April 15.

Yes, as long as rental income from the property is not used to qualify and the borrower continues to occupy the
property as their second home, it is not considered “rental property” and the loan is eligible as a second home,
if all of the other Second Home Requirements in the Selling Guide (B2-1-01: Occupancy Types) are met (see
below).

1.  Second Home Requirements
   * Must be occupied by the borrower for some portion of the year 
2. * Must be a one-unit dwelling must be suitable for year-round occupancy 
3. * The borrower must have exclusive control over the property must not be a rental property or a timeshare
4. * Arrangement cannot be subject to any agreements that give a management firm control over the occupancy of the property