Investment Loan vs Primary Residence Loan

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I dont understand the difference between conventional bank financing for a primary residence or an investment loan. How do rates differ? Are there more costs with an investment loan? Is it okay to rent out a primary residence? I was preapproved for a loan at 5% down, up to 400k. Currently, I do not own any properties and my primary residence is living with relatives. I want to focus on multifamily units. I don't know if I am supposed to live in this property or not. If I don't have to live in the property I could also look at SFH, but I still want to focus on multifamily. I am not sure who to talk to about this and what is legit. My mortgage broker was telling me it would be okay to call whatever purchase I make my primary residence even if I don't plan to move in. Is that right?

For low down-payment mortgages, typically there is an affidavit that you sign stating you intend to owner-occupy the property for a minimum of 12 months. With FHA, you could purchase up to a 4-unit building and rent out the 3 other units.

Sounds like your current mortgage broker doesn't like having a license.  

A primary residence is the home you "intend" to live in for a period of at least one year when you apply for a loan.  If a lender finds out you didn't move into the property or are not living in the property, they can call their loan due.  If they found out you never had an intent to live in the property, but took out an owner-occupied loan, you have committed mortgage fraud.  Chances are they won't care about your fraud as much as the mortgage broker who knew you were not going to live there.

The difference between an owner-occupied home loan vs. non-owner occupied home loan is down payment and interest rate.  N/O/O is higher risk, so you will need to put 20% down payment and take a rate of about .5% higher.  O/O home loans can have no money down, but most people put down 3.5% to 5%, depending on the loan program.

Hopefully this helps you make the right decision.

Bryan Blancke A loan for an investment property is going to require at least 20% down in today's lending environment. A loan for a personal residence can be as low as 3.5% down Yes you can rent out your personal residence. However, if you are looking at getting an FHA loan, which it sounds like you are, than you must occupy the property for 1 year. With FHA loans, you can buy between 1-4 units, so you could go right to multi family like you were planning on as long as you occupy one of the units for a year. Hope that helps.

You are asked to designate on the loan application whether or not you intend to occupy the property as a primary residence.  If you say yes, to get better terms and rates, and then rent it out after you close, that's called mortgage fraud.

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