Investment property vs primary residence?

Question

Hello,i am first time home buyer so if I sound too ignorant, please dont mind me. So, whats the definition of primary residence? Is there a certain amount of time I need to live there for the loan purposes? Im curious because Im in the process of putting in offers for some homes that I like but my lease isnt up for my condo Im renting now. So in case I get penalized for early termination, Im considering to rent out the house I end up purchasing for about half a year until im ready to move in. so from the lender’s point of view, would they consider it as an investment property? Or if I just change my address to the new home and ask the tenants to give my mails from time to time, would that be ok? So what measure do the lenders take to check if the house Im purchasing is my primary residence or not?

Frank Chin · Answer

@Sooyeon Kwon

When you obtain an owner occupied mortgage, you're expected to move in within two months and stay at least a year before moving out. You had to live there at least 2 years some years back.

I don't know too much about how they do random inspections. Some years back, a co-worker of mine found someone checking her mailbox out by the curb, then walking to her back yard on the way home from work. She asked the man what he was doing there. The man explained he was hired by the bank to verify owner occupancy of mortgages that the bank extended, and she agreed to such verification when she signed the mortgage documents. She actually live there, and verified who she was.

If I were you, I would work out something with your landlord, advise him what is going on, and offer to help him rent out the place. A tenant of mine had to relocate for a new job, had to vacate in the middle of a lease. He offered to advertise on the internet, interview applicants, provide me with the top three candidates so I can vet and approve. He did that, moved, and the replacement tenant moved in 3 days later with no vacancy. He hired a cleaning crew to clean the place.

He managed to get the place rented out for $150/month more than I thought, and the new tenant had been there now for several years. I had many tenants move out in the middle of leases in the 40 years doing rentals, for a variety of reasons, such as death in the family, job relocation, buying a house etc. and I found it best to work with the tenants.

If the bank find out you  rented out a property with a owner occupied mortgage, they can revoke the mortgage and demand payment in full. All in all, honesty is the best policy.

Sooyeon Kwon · Answer

Thanks so much for your input!!!