Must Sell SFR to Purchase Duplex as Primary Residence?

Question

Hello BP community,

I would kindly ask for your input on this issue.

I recently spoke with a mortgage broker regarding purchasing a second home and renting out my current residence. He gave me rates based on different scenarios. I currently live in a SFR that I purchased with a conventional mortgage. Due to family changes and ever increasing taxes in my area, I am looking to purchase a duplex nearby and make it my primary residence.

The broker told me I would have to sell my current SFR in order to purchase the duplex as a primary residence even though I qualify to buy it as an investment property (at a higher APR, of course). I was puzzled. He told me its so people don't try to "cheat the system". I have lived in my current residence for over a year and I'm looking to downsize, rent out my SFR, and have the added cash flow subsidize my mortgage payments.

I would like to hear from other buyers/investors/brokers - is there truth to this rule? Or is the broker trying to get me to borrow at a higher rate? Any suggestions or strategy is much appreciated.

Thanks

Q

Qusay F. · Answer

Good strategy @Neil Schoepp. Getting a lease signed shouldnt be difficult with the spiking demand and falling inventory of quality SFR rentals here. Thanks

Qusay F. · Answer

Thanks for your reply @Forrest. Its encouraging to hear from others who have succeeded in similar endeavors. I will be reaching out to other brokers as well.

Neil Schoepp · Answer

@Qusay F.

Your broker is not trying to get you to borrow at a higher rate. The thought out there is exactly about gaming the system. You say you are going to move into the duplex but never do. Now it's an investment property not owner occupied.

Ask how he feels if you have a signed lease for the SFR Before you close on the duplex.

To your success.

Forrest King · Answer

I think you should talk to more brokers, banks and mortgage companies.

I've lived in my SFR for 8 years. I just took out a Heloc to cover the down payment and closing costs on a 4-plex I'm going to owner occupy with a 3.5% down FHA.

I talked to 12 different banks, credit unions and mortgage companies before I found one who I jived with, at the recommendation of a fellow investor.

They want a signed rental agreement on my SFR before closing on the 4-plex, and a letter explaining why I'm downsizing.

Not one has suggested I sell my SFR.