2nd Home Mortgage & Occupancy Fraud?

Question

Good Morning Everyone!

New guy here. So I was hoping to get some clarity as to getting a 2nd home mortgage and what constitutes as occupancy fraud. I have noticed that many investors, even some who run Biggerpockets, claim that you can get a 2nd home mortgage with 10% down, can use the property a little yourself, and convert the property to an Airbnb investment. This sounds great at first. However, I am hearing that this would constitute as occupancy fraud. My mortgage guy told me as such and other articles indicate the same. Am I possibly missing something here? I am unsure if people are able to pull this off simply by "using" the home for a short period of time. Also, I have heard that you cannot rent a 2nd home, while other claim you can if the lender allows it?

Because I am new, and obviously want to abide by the law, I was hoping someone could shed some light on this for me, especially if they are in the mortgage business, or, you are someone who took out a 2nd home mortgage, converted the property to an Airbnb, and it worked for you. Thanks so much for all of your time! I am sure if anyone can answer this, it would be very helpful to the community.

- Adam

Lauren Kormylo · Answer

Here are the Fannie Mae second home loan guidelines. Lenders can interpret them differently, however.
You can see that if you do rent it out, you can’t use the income to qualify for the loan. https://selling-guide.fanniema...

Avery Carl · Answer

I am not a licensed loan officer but here is my opinion:

You can get a second home loan and still short term rent it, but you do have to truly intend to use it as a second home. Right now, there is nothing in the guidelines saying that you can't rent it out when you aren't using it. But I would definitely make sure that you are using it and only renting it out when you aren't using it if you go 2nd home route. If you don't plan to use it at all and just use it as an investment, then there are 15% down investment options that you can go with to avoid potential mortgage fraud.

It's always best practice to play by the rules.

Mel Adams · Answer

Hey Adam - I used a second home loan for my short term rental. I told my lender that was my intention, she told me the can’s and cannot’s, and I was good to go.

The amount of days you’d need to stay in the property during the year really depends on the lender. I’ve heard 14 days, 10% of booked days, and my lender said “some time.” This part seems to be the most varied.

Definitely reach out to several different lenders and see what info you get back. Feel free to message me if you have any other specific questions on it. Hope this helps!

Adam Gonzalez · Answer

Thank you for your feedback! Ironically, I just purchased your book and put 2 and 2 together that you replied to my inquiry. So awesome! Great book by the way. You don't happen to service West Virginia do you?

Adam Gonzalez · Answer

Thanks for sharing your first hand account! :)

Adam Gonzalez · Answer

Thank you both for your reply. This information is very useful!

2nd Home Mortgage & Occupancy Fraud?

2nd Home Mortgage & Occupancy Fraud?

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