How Lenders Verify Owner Occupancy

Question

I recently went to Wells Fargo and they're offering me 5% down on an owner-occupied duplex (I think it's a program they have for first time homebuyers). I'm all for playing by the rules, but how does a lender even verify that a home is owner-occupied after they provide the loan?

It'd be nice to start renting out the owner-occupied unit and receive income from both units. What's to stop me from renting out the owner-occupied unit? Is there a penalty of some sort if caught?

The only thing I can think of is taxes, where I'd miss out on some incentives because the home is a primary residence and not an investment. Any help understanding this is much appreciated.

Theo Hicks · Answer

Starting your real estate career with fraud isn't a good idea.. Just live in the unit for a year and then do another owner-occupied loan.

Russell Brazil · Answer

Lets not overlook being properly insured as well.  If you had the proper insurance in place, your lender would have a copy of your policy and see you are not occupying it.  If you dont have the proper insurance in place......talk about risk, no insurance and mortgage fraud.

Kwaku Farkye · Answer

@Tom S. thanks, makes sense.

@Bill Brandt lol... I thought it'd be better to ask on the internet instead of when I was talking to the lender.

@Theo Hicks Account Closed thanks, I definitely don't plan on going that route, but I was curious to understand. some rules are meant to be broken, others not so much. gotta love risk and reward

Account Closed · Answer

@Kwaku Farkye Sounds appealing and theres a chance you wont get caught but save yourself the trouble and dont do it. They have several verification methods such as mailing address changes and an actual visit.

Bill B. · Answer

@Kwaku Farkye

About the only reasonable response to why ask on the Internet. Good one. Made me laugh.

Good luck.

Tom S. · Answer

@Kwaku Farkye  A few different ways: change of address when they send the bank statements, insurance change of address, or sending someone out.  I had B of A do that to me once in the past.

Most creditors also monitor your credit reports through "soft pulls", so a change of address could show up there as well.

Will C. · Answer

@Delmas Gibson

Depending on your loan product you sign a federal notice at closing stating you will owner occupy for however long is the required duration. Most time it's a year, I've seen longer time requirement for loan products with greater financial assistance. So it's not "it sounds like", it is what is spelled out in your closing package.

Theo Hicks · Answer

@Kwaku Farkye no real estate law is meant to be broken.

Chris Mason · Answer

Hahahaha, 10/10. Bookmarking to share in the future. That's a pretty good list.

Nathan Hall · Answer

@Kwaku Farkye I'm going to take a different tack, here. I like the way you think. If I can get a duplex down the road on my VA loan and just sleep there and get my mail delivered, and still hang out with my family it go to work the rest of the time, that might be worth it. Good thinking!

How Lenders Verify Owner Occupancy

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