Legalities Of Buying Second Home Under Owner Occupied Loan

12 Replies

Hi BP,

Background info: I am living in my wife's house(her house and not mine legally). I don't have much capital for investments and people have recommended house hacking to me because of some apparent loan benefits (apparently lower down payments:Am I wrong?). I am wondering what are the legal definitions of "owner occupied." My idea is to purchase a home in my neighborhood for investment purposes using the owner occupied loan benefits and have a roommate rent out that house. I am willing to sleep there for the majority of my time if necessary but would like to know the bare minimum amount of time I must spend at that house. 

Thank you all

you must live in it for 1 year.. your skating on thin ice though with your thought process.. you get caught and someone wants to ring you up you have now got a felony and potential jail time.. mortgage fraud is no joke these days..

You probably shouldn't say this to your loan officer

"My idea is to purchase a home in my neighborhood for investment purposes using the owner occupied loan benefits and have a roommate rent out that house."

Plus house hacking is going to kill your cash-flow if you're "living" in half the house. You're literally going to half the cash-flow for what?

@Cody Evans   I agree with @Jay Hinrichs you are on thin ice.  The problem is less about where you will sleep than what your intentions are for the property.

It also depends on state laws, because courts have taken where a person votes into consideration.  In Texas, the rules are very flexible about where someone votes.  In other states not so much.

I would say the thoughts in this link are very conservative if you want to push farther than what they suggest talk to a lawyer in advance.

http://homeguides.sfgate.com/differences-between-o...

@Michael Biggs   this reminds me when I was sitting in front of regulators and they asked how many loans I made last year.. I said none that fall under your jurisdiction because my lawyer told me so... well she says let me show you were your lawyer is not correct.... she shows me the statutes which were pretty new to be fair to my lawyer.  then says would you like to rephrase your answer.. and I said based on this new evidence I have done 420 loans in the last year  LOL... you kind of had to be there.. the state gave me a one time pass.. but I was on the watch list for the next 18 months..

As you state so much of this comes down to intention all a regulator would have to do is get a copy of this BP thread and this young man would be toast  LOL...  owner occ loans are for those that move their entire family into the home and live there for at least a year.. that's what they are designed for.. NOT some one reading BP that wants to in the worse way be a landlord but simply does not have the funds to become one..

I figured I would move a tenant in after a year. I don't know much about these loans. I thought maybe this was a frequent occurrence that the lender wouldn't mind if they see I am making all the payments. I'm not trying to be shady even if it's legal. This is just another option I was exploring and now crossing off the list. Is this loan available for multi families? I have to check the cost of these but I will then genuinely move into it so my cash flow isn't as poor as it would be to share a SFR.

Thank you for the info. 

You realize that you're going to have a harder time going at this alone based on your salary right? You'd be looking at like probably 150k max based on your stated salary. You'd likely fare much better partnering with the wife to increase your budget.

Have considered actually moving into the house?  Both you and your wife move into the new property and rent out the current home.  After a year you could always return back to your current house and rent out the second one.  Or better yet buy a third house and move into that and rent out the first two.

@Matt K.

Yes it'll be difficult and I must generate more income. I am currently looking at getting a business started as an agent nights and on weekends. 

@Paul Bowers

I'm not sure if the bank will allow me to take out that much debt and I believe that would still be fraudulent.

Originally posted by @Cody Evans :

@Matt K.

Yes it'll be difficult and I must generate more income. I am currently looking at getting a business started as an agent nights and on weekends. 

@Paul Bowers

I'm not sure if the bank will allow me to take out that much debt and I believe that would still be fraudulent.

you'd probably have a better ROI as a tutor since you're already a teacher. You could probably get about 25/hr maybe more if you develop a client base. Being an agent doesn't do a lot for you in reality (unless you wanted it as a career vs investing). In all honesty you could probably wholesale AND tutor... on top of your current job.

@Matt K.

I think you've hit the nail on the head except I am unsure about real estate agent being a bad prospect just yet. Tutor is an option I began exploring a month ago. I am looking at being a bird dog to get the ropes down and then transitioning to wholesaler. I am still unsure about what a wholesaler is and perhaps I should start there instead of bird dog. 

Originally posted by @Cody Evans :

@Matt K.

I think you've hit the nail on the head except I am unsure about real estate agent being a bad prospect just yet. Tutor is an option I began exploring a month ago. I am looking at being a bird dog to get the ropes down and then transitioning to wholesaler. I am still unsure about what a wholesaler is and perhaps I should start there instead of bird dog. 

 neither of those require a RE license.... 

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