Committing Mortgage Fraud via Househacking Strategy

Committing Mortgage Fraud via Househacking Strategy

Philadelphia, PA · Member since 2013 · 43 posts · 12 votes

Hey BP,

I'll try to keep a long story short.  Currently about to purchase a 4BR 2.5 bath single family that I rent in Pittsburgh and turn my 3 roommates into tenants.  The advantage of this is that it will continue to be my primary residence, however, I will be able to have them pay the mortgage and I will be able to get conventional owner occupancy financing for the deal...or so you would think.

In a recent conversation with my mortgage broker, this came up.  Despite already being pre-approved and almost having a deal in place, we decided to throw out some "what ifs" around.  According to him, you cannot, under any circumstance, collect rent (income) from you primary residence.  I was sure to dig deeper and ask how this would apply to multi-families etc etc, however, he proceeded to tell me if the borrower knew this was his/her intent from the onset that this be disclosed and therefore down payments would need to be of at least 15% because this would be deemed as an "investment".  He went on to explain that this and another situation like say, buying the house today as owner occupied and turning it into a full rental in 3 months would constitute mortgage fraud because of the advantage one could get as it relates to the acquisition of the loan.

I have an extremely hard time believing this considering "house hacking" is such a common strategy across the board.  Could it be that this is lender specific?  For instance, this conversation took place with Quicken.  I'd like to stay away from the big lenders altogether but I've had a great interaction thus far and am being given super competitive rates compared to the smaller, local lenders.

That said, I'm looking for a little guidance and/or perspective as to whether or not this may be an issue for me down the road.  My full intent for this property is to buy it today, live in it and have my 3 roommates pay me rent and then in 2 years move out all together and it to continue as a rental for many years to come. 

Thanks,

Cam

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Investor · Saint Paul, MN · Member since 2012 · 19 posts · 18 votes
9y

I believe that this mortgage broker is incorrect.

You need to move in within 60 days of closing and occupy the property as your primary residence for at least 1 year.

You are allowed to have roommates, family, tenants in your primary residence so long as you are still living there for 1 year. It's really none of their business what you do so long as you are fulfilling the obligations that you agree to when you close the loan (move in within 60 days, live there 1 year). I wouldn't even mention it.

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  • Springfield, MO · Member since 2017 · 158 posts · 114 votes
    9y

    I asked a similar question to a real estate friend of mine a few days ago. She said that she has never seen a lender make a note "due" because the owner was renting out the property even if it was not owner occupied. 

  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y
    Originally posted by @Chris Mason:
    Originally posted by @Brent Coombs:
    Originally posted by @Chris Purcell:

    @Cameron C.

    This is interesting.  Technically your house won't be vacant at closing since you and your buddies live there.

    Your lender doesn't care?

    Chris, you should've used past tense, because it's ALREADY closed (see above)!

    My question to you is: why SHOULD the Lender care that Cameron bought the home where he was already residing? I can't think of any reason (and obviously, neither could the Lender)!...

     Tenants buy homes from their landlords all the time. 

    Exactly! Cheers... 

  • Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes
    9y

    @Brent Coombs

    Sorry didn't read whole thread

    I guess they would care that he's buying a primary and the appraisal comes back occupied?

    Just an interesting situation because he's living there

    Would think they would want it "vacant" upon closing and then you can do whatever you want but I'm way off

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