I am currently “house hacking” a single family residence with Airbnb. I rent out 4 rooms while living in the 5th bedroom in a separate suite. This produces significant cash flow each month and I am living in the home for free.
I want to purchase a second owner occupied home and do the same thing, while leaving the first home operating as an Airbnb. However, I need to better understand the rules around financing and owner occupancy.
I purchased the home 8 months ago using a 5% down conventional owner occupied loan through Wells Fargo. Ideally I can finance the second property the same way and switch my primary residence to the second home, while renting out my portion of the first home to a long term tenant.
What is the best way to obtain financing for the second home? Would having a signed lease agreement in place for the first home count towards my DTI qualification?
@Kyle Moore Hmm, this one might be hard to accomplish. If you received a conventional loan (meaning Fannie Mae or Freddie Mac) you pledge to live in that property for 12 months. There should be some specific verbiage in your loan paperwork to this effect. So if you apply for a new primary home loan they will want VERY strong reasons why you are doing so. Something to the effect of your job is transferring you, or your family grew, etc. And if you are staying close to your current property then it will likely not be approved.
However, if you were to apply after your 12 months is up, then it would be easier to be approved. They will still want a reason why but it is easier after the 12 month period. If you have an executed lease agreement when you apply for the loan that will offset the current mortgage payment and help the underwriting see that you are moving out of the property as well.
I hope this helps but feel free to ask anything additional. Thanks!
Thanks for the info. Very helpful.
I reviewed my current mortgage docs and there is certainly a clause for retaining occupancy for 12 months. That would be this December. Ideally, I can push out the close on the second house and leave it unoccupied until then, which would allow me to satisfy the occupancy period on my first home. Would a lender be on board with that?
I have zero intention to commit occupancy fraud - though I would like to better understand how lenders can be flexible with the 12 month period. Aside from the income potential I have no good reason to move - the houses are nearly identical and no more than 5 miles apart. And quite honestly, I had no intention of moving this early until this opportunity came up.
@Kyle Moore I'm tracking with you. And I didn't feel that anything fraud wise was occurring here. This is somewhat a common topic for people to ask about.
Now, about buying the property and leaving it empty for a while....unfortunately, you also have to occupy the property within 60 days of closing on the loan as well. So it's kind of a catch 22 in a way.
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