Is this Occupancy Fraud?????????????

Question

Planning on buying a multi-unit property on a conventional loan. Do i have to live in this for a year? I was planning on collecting 6m of rent to then apply for a new loan. What are the odds that this is possible?

Bill B. · Answer

Your loan docs either will or will not have at least one full page of text asking you to sign, swearing you live there. If it does. Obviously thsi is mortgage fraud, not occupancy fraud. I don’t know why you would try to mislead the people who trust you with heir money, but please don’t.

Look them in the eye and ask. Do I have to live here for a year or can I move out in 6 months. If they say no, GET IT IN WRITING.

1) I assume you plan to get a loan for your next purchase, it will be obvious to that lender you bought a primary home less than 12 months go and probably plan to screw them too. This is where the signed paperwork comes in handy. If it’s true.

2) Try this plan. Live there for 9 months. Then start shopping. Go under contract in month 10. And move in late month 12. Then it’s ready to rent out after a year.

This is the EASIEST crime to be caught at in the world, and they can catch you a year or two later. Unless you don’t plan to have landlord insurance, or a lease, collect rent for unit 4 only in cash, lie on your income taxes, don’t get utilities in your name at the new place, pay all cash for it, and “forget” to update your address at work, the dmv, and post office.

Your future life will be exactly the same if you buy a second property after 6-9-or even 12 months. Good luck and go forth in good conscience.

Ken M. · Answer

"Ken Yiu, 49, of New York City, New York, pleaded guilty today to submitting a false mortgage loan application and maintaining a marijuana-involved premises.

According to court records, Yiu, purchased a house in Saint Albans, New York, using an $80,000 residential mortgage loan he obtained from a Maine bank. To receive the funding, Yiu submitted a loan application in which he answered “Yes” to the question, “Do you intend to occupy the property as your primary residence?” Yiu never intended to occupy the property in Saint Albans as a residence. From September 2020 through January 2024, he instead used the property to grow and distribute marijuana.

Yiu faces up to 30 years in prison and a maximum fine of $1 million for the mortgage fraud count

Rick Albert · Answer

Keep in mind the paperwork typically says you intend to live there for 12 months. When you apply for the next loan, the lender will question why you are moving. Also recently guidelines changed where if you get an FHA loan on the next purchase, they won't count a new lease for your previous rental if it is within a certain distance. I ran into that issue recently and had to switch to conventional.

For example, I had a client refinance their house and within a few months moved maybe 10 minutes away. The lender questioned it and my client explained that they realized their kid needed more yard space and the new house was materially larger, so the lender was fine with it.

Don't do anything fraudulent or illegal, intentionally or not. It's bad business practices and it sounds like you already know this but was hoping someone would tell you it's okay when it isn't.

Drew Sygit · Answer

People speed all the time - and don't get caught.

Doesn't make it right.

Also, getting a ticket is one thing, going to prison...

Ryan Spath · Answer

You have to intend tolive in the property for 12 months. If something happens and you can not your fine. If you intend to not live in this property for the term prior to acquisition, you could get yourself into a sticky situation. I would consult with your lender on this.

Derek Brickley · Answer

Hey Aubrey!

So grey area here... the unspoken rule is 12 months and prior to that you would likely not be able to get another primary residence loan.  You absolutely have to move into the property within the first 60 days of closing that will be in the documents you sign at closing.  Now here's the way for you to get approved sooner than 12 months - if you're upgrading and have a good reason.  For example, going from a multifamily to a single family, moving closer to work, increase in family size, etc. Signing your closing documents on a primary residence confirms your intent to occupy, though intents can change with time.

Janice Carter · Answer

If you sign for an owner occupied conventional loan, you are certifying intent to live there for at least 12 months. Planning to move out early or never occupy is considered occupancy fraud.The bottom line is, don’t misrepresent occupancy. If your plan is primarily investment focused, look at non-owner occupied financing from the start.

Brandon Cormier · Answer

@Aubrey Rossano

I agree with Bill — moving out too early could potentially get you into trouble.

That said, you can usually start the process a bit earlier. Getting pre-approved and beginning your search around the 8–9 month mark is fairly common. Since many owner-occupied loans require you to move into the new property within about 60 days of closing, the timing can still work out where you technically fulfill the one-year occupancy requirement at the first property.

For example, if you close on the next place around months 10, that move-in window can carry you through the full year on paper at house #1.

Just be careful not to push it too aggressively. Lenders expect the original purchase to be a legitimate owner-occupant situation, and it’s much easier nowadays for them to verify things like address changes, records, and occupancy history

James Jones · Answer

On a conventional owner-occupied loan, yes, you're typically required to occupy the property as your primary residence for at least 12 months.

Leaving before that without lender approval can be considered occupancy fraud. That's a federal issue, not just a lender slap on the wrist.

The plan you described is possible, but the sequence matters.

Live there the full 12 months. Document it. Then refinance or apply for the next loan with that rental income on your returns.

Talk to a real estate attorney before you move. Get it structured right from the start.

Is this Occupancy Fraud?????????????

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