Owner to landlord due to pregnancy!?

11 Replies

Very basic question here. I bought a townhome under my own name in oct 2020. Now my wife is pregnant and she bought (her name and money only) a larger townhouse in same zip. My question is do I have to worry about mortgage fraud if I try to rent my property a few months before the general 12 month “seasoning”. She was not pregnant when I bought my property. Or is this question void because the new property doesn’t even involve me. Or should I just call my lender and explain my situation? Thanks in advance to the BP community!

J-

Hi @Joe Geist if this is something you have any apprehension about it should be simply remedied by a quick call to your lender.  

Typically change of life situations are a protected scenario in loan fraud considerations and your question to them should constitute an attempt to deal in good faith even IF something did come up.

Keep asking good questions and seeking to do what is best!

Go, Joe!

You should either follow the agreement or seek permission to deviate from it. That said, the odds of anyone catching you or caring about it hovers somewhere around 0.00000001%, plus or minus 0.00000002%

If you truly intended to live there for more than 12 months and are comfortable defending yourself on that basis, you are technically fine. That doesn't mean the bank wont try to drag you through the dirt, but the odds of them doing so are very slim. 

Originally posted by @Andrew B. :

If you truly intended to live there for more than 12 months and are comfortable defending yourself on that basis, you are technically fine. That doesn't mean the bank wont try to drag you through the dirt, but the odds of them doing so are very slim. 

And made more slim keeping utilities in your name...

 

Originally posted by @Joe Geist :

Very basic question here. I bought a townhome under my own name in oct 2020. Now my wife is pregnant and she bought (her name and money only) a larger townhouse in same zip. My question is do I have to worry about mortgage fraud if I try to rent my property a few months before the general 12 month “seasoning”. She was not pregnant when I bought my property. Or is this question void because the new property doesn’t even involve me. Or should I just call my lender and explain my situation? Thanks in advance to the BP community!

J-

 

Looks clear that your intent was to have this be your primary residence when you made the purchase with the loan. I'd say your risk exposure here is fairly slim.

The new property does involve you, because you are married and will be living there. That means you are not living in your current property, which you signed a contract saying you would occupy for a year in exchange for favorable loan terms. 

Appearance of intent matters more than stated intent. Stated intent can be a lie. People mistakenly believe they can just do whatever they want and hide behind intent. The fact that you wrote the loans under personal names appears like intent to hold multiple owner occupied mortgages, even though you are married and live together. Change of life circumstances increasing family size may qualify you to move before 12 months, but you have not even had the child. If your intent was to be transparent about this, she should have asked something like this:

"I should disclose that I currently live with my husband in the same zip code in a property purchased less than one year ago on an owner occupied mortgage. He will live with me in the new property. We are upgrading due to my pregnancy. The new townhouse has 3 bedrooms and the old one had 2 bedrooms, that is why we are moving. Is this ok?"

I would also check on homestead exemption and insurance. When you move out of the first property, you need to update both to reflect non-owner occupied. That could increase taxes and will likely decrease insurance. Insurance is important because holding the wrong type of policy can result in denied claims.

There would be further complications if these are both FHA loans. It would also be a problem if your wife failed to disclose marital status on her loan application. If it was an FHA loan, they would have required your credit pulled and found the other mortgage, so I assume this is conventional.

Going forward I suggest being more transparent and honest with lenders upfront

@Joe Splitrock appreciate the details- let me provide some to maybe help clear things a bit. 8 months ago I bought my bow wife's townhouse from her (we were both living in) . This way she was able to completely pay off student debt and car debt and have some cash for the wedding. Our plan at the time was to live in the original townhouse and save for another property. A few months later we found out we were pregnant. We then got married and just yesterday found a deal we couldn't ignore and got it under contract. She did disclose that we are married and we only submitted her financials to the bank (VA loan). So this dynamic situation was a plan down the road when I got my original mortgage- but obviously not within a year. My original loan was 5% down.

We are also still living in our townhouse and close on the new property in august so at that time I will be 10months. So maybe that provides some context.

Thanks again for your response

Originally posted by @Joe Geist :

@Joe Splitrock appreciate the details- let me provide some to maybe help clear things a bit. 8 months ago I bought my bow wife's townhouse from her (we were both living in) . This way she was able to completely pay off student debt and car debt and have some cash for the wedding. Our plan at the time was to live in the original townhouse and save for another property. A few months later we found out we were pregnant. We then got married and just yesterday found a deal we couldn't ignore and got it under contract. She did disclose that we are married and we only submitted her financials to the bank (VA loan). So this dynamic situation was a plan down the road when I got my original mortgage- but obviously not within a year. My original loan was 5% down.

We are also still living in our townhouse and close on the new property in august so at that time I will be 10months. So maybe that provides some context.

Thanks again for your response

The trouble is that "a deal you couldn't ignore" is not a valid reason to violate your mortgage contract, so don't tell anyone that ever again. She probably sold the property to you just so she could reuse the VA program. That honestly makes the whole thing look worse and is all the more reason to be careful. Your wife needs to disclose to the lender that she is currently living with her husband in a house that was under a government backed loan with 12 month occupancy requirement. You need to contact your mortgage company and explain what is happening. Make sure they are both good with it before you proceed. The danger is something could come up later in the process. The VA lender could flag it during underwriting or your lender would see it when you change insurance. It is better to face it head on. Use the baby as the reason and it will probably be fine.