Buying House Hack as Primary without Fraud

4 Replies

Hi Folks,

I’m interested in buying a multi family as my next investment as a house hack, but then eventually moving back into my primary. 

My lender told me that having tenants Sign a contract before moving out of my primary would increase the likliehood of underwriter approval. 

Does anyone know if there are any lease limits to this (for example, can I use my home as a STR and buy the multi family as a primary?)

What’s the best way to do this? What have you seen done?

Hi @Abe Alam , I appreciate the heart behind your question here!

In general lenders don't like STRs (short term rentals) . . . neither do insurance companies for that matter. I don't know if it is because its en vogue or higher risk or something else, but all-in-all without having operated it as an STR for a year or so and having it on your tax returns it is unlikely the lender will consider STR income in your current primary residence for qualification.

However, the common route people go here is to discern the market value of your current home, feed that information to the lender with a, "hey Lender, my home should (conservatively) rent for $X/month here . . . IF that were true, what would I be able to purchase."  Figure out the financials of the purchase and then when you are under contract on your replacement home you can start marketing your existing home for lease on a 12-month lease.  You'll need to be in your house-hack for at least 1 year under normal circumstances in order to comply with the owner-occupancy obligations there.

Your lender is basically wanting to make sure that you will be living in the new home and it will be your primary residence.  Having a lease signed saying someone is moving into the current home is one way to do that. Problem is it will probably be at least a month before you move out and into the multifamily (assuming everything goes smoothly) and  a lot can happen between now and then.  Eg whoever signs the lease for your current home, may change their mind.

@Abe Alam , are you needing the rental income to help your DTI ratio for the new mortgage? The route I took was to buy the multifamily as my primary, move in and lease my former primary on a standard 12 month residential lease. But I didn't need the rental income on the first property to qualify for the mortgage on the multifamily.

As noted, assuming you don't have an HOA or local government rules forbidding a STR, you can go that route, but the income will not be used when underwriting loan on the multifamily.

@Evan Polaski

I didn't need rental income when I did this before and my income has not changed, so I would think not... I may investigate that further. 

Would it be possible to move into this multi family while keeping my current house empty? That's where the mortgage fraud issue can come into play I've heard however. 

I assume you moved back into your primary you had before the multifamily? That would be the plan for me if possible. I've heard that 12 months in the new property is needed.