Conventional Loan: Should I be honest?

Question

I've started the process of talking to brokers about getting a conventional loan(preferably FHA) to do my first flip and I'm straight up with them by telling them I attend to flip the house as soon as possible.  A couple brokers have told me they don't do conventional loans on flips and refer me to one of their commercial mortgage brokers but I don't want to do a commercial loan because of the higher down payment.  So do I act like I attend to live in the home for several years so I can get the loan or do I keep on looking for a lender that will work with me?  I don't want to lie because I'm looking to build relationships so I can continue to do this far into the future.  What are my options?  And thanks to anyone that takes time to read this and reply!  Anything helps

Cassi Justiz · Answer

FHA loans are intended for owner occupants. Mortgage fraud is something that can get you into a lot of trouble. It's not worth trying to get around that.

I would go to a private lender to get the loan for your flip. If you network with your local investor groups you should be able to find someone that is reputable in your community that does private lending.

If you want to "flip" a house with a conventional loan, you will probably need to do a live-in flip and stay there for a few years before selling it.

Dave Foster · Answer

@Ryan Clevenger, Stay honest.  Take the cheap loan and do a live in flip  BUT... Stay in it for 2 years and as soon as your done with the remodel get a heloc on it.  Use that to purchase your next property.  And when you sell this one after 24 months all the profit will be tax free instead of having to pay ordinary income tax plus self employment on the sale.

This might actually get you to your next property more quickly while saving significant tax dollars and satisfying all lenders.

Matt K. · Answer

FHA is a year as your primary residence...

Caleb Heimsoth · Answer

you have live there a year with fha

Christopher Giannino · Answer

As the others have stated, FHA and conventional loans require you live there for a year.  At closing you literally sign a paper that states you will live there for a year.

If you're looking to flip, I would think that these type of loans wouldn't really be good for you anyway.. Look into either a hard money lender or private money or some other sort of creative financing because those would probably be better for flipping.

Regardless of all that, you 100% should be honest with lenders because if you lie it's considered mortgage fraud.

Account Closed · Answer

hello all.

Im new. I’m negotiating a property already. I’m unsure if I will BRRR or flip Yet.

Im pre approved to finance with a conventional loan, for investment property, paying 20% down.

Would I get in any issue if I flip or refinance after 6 months because it is a conventional loan?

Thanks!

JC Ramirez

Investor

Stephanie P. · Answer

I'm hoping your thread was just poorly worded "I don't want to lie because I'm looking to build relationships."  How about "I don't want to lie because it would considered mortgage fraud and I wouldn't do well in federal prison" or "I don't want to lie because it's the wrong thing to do."

Let me state this plainly; no reputable lender, in this day and age of NMLS licensing and the ramifications against the individual loan originator and the broker, will "work with you" to get a loan through.  They will all be selling that loan to the secondary market and don't want to risk their license, their reputation or their freedom for mortgage fraud.

House hacking is one of the best ways for individuals to build wealth; I am convinced of it.  If you are house hacking or considering house hacking, you're doing it for a reason and generally the reason is you aren't flush with cash.  If you don't have the cash, but want to use FHA or even Fannie/Freddie, there are rules. Remember that old adage; the golden rule is 'He who has the gold, makes the rules."  In your case, if you want to borrow using one of these agencies, then you have to follow their rules.

If not, pay cash.  It's really that simple.   Lying, stretching the truth, lying by omission or any other way of obfuscating the truth should never be a consideration.

Sorry if my rant was off base.

Hope it was.

Best of luck to you

Stephanie

Ryan Clevenger · Answer

Thanks @Caleb Heimsoth and @Cassi Justiz.  I'm wanting to do a live in flip, the home was going to be my primary residence but I just didn't realize that I had to live in it for atleast 6 months.  I guess that means if I got the conventional route it'd be better to look at multi-family and possibly use the BRRRR strategy

Conventional Loan: Should I be honest?

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