1 year owner occupied requirement?

11 Replies

How does the bank know if you are fulfilling your one year owner-occupied requirement? Does this change if you move out but don't actually have a tenant until after the one year is up?

I'm not saying I am going to do this but I would like to start house hacking once my one year requirement is up. I want to start looking early to give me plenty of time. However, what if I find the right place before that one year is up?

On a side note, any suggestions to perhaps get around this and start house hacking earlier? I plan to keep my current residence as a rental so selling is not really my first option.

Thanks!

Well I suppose you could go on an extended vacation and still consider it your primary but you shouldn't change your address until after a year

@Cody Steck  These are the things that I thought about.

1. Do not have a tenant in the residence until after the 1 year

2. Do not change your homeowners insurance to non-owner occupied until after the 1 year

3. Have the utilities turned on and in your name until after the 1 year

4. Do not attempt to purchase another primary residence until after the 1 year

5. For your taxes use the property as your primary residence

I work pretty far away from my primary residence (85 miles), and rent a place closer to work so that I don't have to drive. I go to my primary residence on the weekends.

Here are the other things I did.

- Changed the address on my drivers license to my primary residence

- Registered my car at my primary residence

402-965-1853

I just can't help spotting the sneaky, how do I do this, not saying I'd do it, but any tips on how to do it, how would they know? Really! LOL

Mortgages are reviewed, audited after they are made, immediately after, a few months later and then pulled randomly for audits.

All the things mentioned are easily checked by an auditor.

Government auditor types have more tools of the trade as well. They may pretext as anyone to investigate a fishy matter and can locate your barber if they need to. They are trained to see through the BS, the smoke, deceptions and pretty well know everything you could do to cover an audit trail. In other words, you don't have a chance if they investigate you.

Now, for the honest way. The owner occupancy requirements can be waived when things occur that present a hardship to an owner by staying in the property, things happen that are unforeseen such as a divorce, separation, loss of job, job transfer, death of a family member or where an owner may be required to care for family, birth of a child requiring additional room, some previously unknown issue, say radon gas at a low level that causes some health concern, a child you is found to need a dust free environment can cause an owner some health, financial or other hardship, that, if that matter were known prior to borrowing or buying, the owner most likely would not have carried out the purchase.

Another exception is something that might occur beyond your control or knowledge, recently we had a post about a homebuyer who was approached by a corporate buyer for a pending development. In such cases, no one will be living there, the zoning will be changed and economic development will be moving through.

In the event of an insured loss where a home is destroyed, the loan may be paid off and that terminates the requirement, there is no requirement to rebuild. If it wasn't a total loss and repairs are expected to take a period of time that makes living there a hardship, the occupancy requirement can be removed allowing the owner to buy another property.

These are examples that may allow you to avoid the occupancy requirements, but conniving excuses and falsely presenting information is fraud, so keep that in mind as well. So is buying with the intent not to occupy. :)  

@Anthony Gayden  

If it is close enough to the one year I think I would be OK to simply wait it out and fulfill that requirement. I could still buy the next place and have 60 days before I have to move into it.

Thanks for the tips. 

Well said @Bill G.  In our area, some lenders do audits by sending their investigator to door knock on your residence several months after you have closed the purchase.  How would you handle the situation if your lender called the loan due after realizing that you don't live there?  I'm not saying it would happen, but what if it did?  Did I get that right, Bill? :0)

Don't start out on the wrong foot, or you may end up screwing yourself in your real estate investment career.  

I saw collusion at the courthouse steps, but refused to participate in it.  The potential profit was HUGE.  It may seem worth it at the moment until you're sitting behind bars.  Then it suddenly dawned on you that it wasn't worth it.  Tread carefully.  

Yes, well, it can mean calling the note due, declaring mortgage fraud, turning it over to the FBI, get free room and board for awhile, lose the property, lose your family since Jody moves in with the spouse while you're gone, it could kill your mother and you dad might disown you, the rest of the family washes their hands of you as a con. Then when you get out, you're barred from any RE activity, you end up washing dishes at some dinner and can't even rent the house you once owned but a rat infested flat in a bad area where your place is robbed. The bad part comes when you call the cops on the robbery and they find the dope dropped by the thieves and you get nailed only to go back for more free room and board. Don't go back for more free room and board, stay in your house as you agreed to do! :) 

Originally posted by @Cody Steck :

How does the bank know if you are fulfilling your one year owner-occupied requirement? Does this change if you move out but don't actually have a tenant until after the one year is up?

I'm not saying I am going to do this but I would like to start house hacking once my one year requirement is up. I want to start looking early to give me plenty of time. However, what if I find the right place before that one year is up?

On a side note, any suggestions to perhaps get around this and start house hacking earlier? I plan to keep my current residence as a rental so selling is not really my first option.

Thanks!

Like a lot of things of this nature, I doubt they check up on it much, but the consequences of being caught could be huge (I think with HUD, it's something like up to 5 years in prison and a $250,000 fine, although I don't think they would go that far).

One way they could catch it that I've at least heard speculated about are the utilities not being in your name. In KC, you can call and see who's name the utilities are in, so a bank could conceivably do it that way. Or they could just stumble upon it. Perhaps if someone got in legal trouble for something else, this could be found out. Or if an agent sees a known investor make a "homeowner offer" they may get suspicious and tell the bank to keep an eye out. I don't know. You probably wouldn't get caught, but as you implied, lying is wrong either way, so don't do it.

Haha, @Bill Gulley  After reading that, I'm never leaving! 

No, but I completely agree. I plan on fulfilling everything I agreed to. I'm just that kind of person. I was honestly just curious. 

other than what should be the obvious honesty and integrity issues, even if HUD doesnt go all the way with the fines, jail time and/or calling the note due, I can guarantee you that you will be barred from future FHA and insured loans.

You hit the nail on the head by realizing you would have 60 days to occupy the next property yourself, even though you could have a tenant occupy a portion of it day 1. Also, depending on the property, you can generally elongate the closing process. That combined with the 60 days should keep you covered. 

@Hattie Dizmond   I didn't think about the tenant part of it. That's good information. I think the combination of those things should definitely cover me enough. Thanks!

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