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I recently closed on a home that under a primary residential mortgage. Before, my husband (whom our finances are completely separate) has a house under his name in which his parents bought and pay off monthly. His parents were there about a quarter of the year but they eventually made the decision to move up and live there permanently. As such, this sparked my interest to buy a place for ourselves and not share with the in laws. I looked for a house, finally found the perfect home and closed the deal and out of nowhere the father in law accepted a job offer overseas and is no longer going to move up into the house we currently reside in. As the current house is larger and nicer, we we're thinking that it makes sense to rent out the one I just bought and stay in our current one. I asked a few people if this is allowed and some of them kept on bringing up the word "intent" (which I was intending to move into the house) and that life circumstances happen and it's ok to rent it out.
I am about 20 days in after close and we have swapped out flooring and painted the walls so far. It just seems very costly to refinance right after I paid all those closing costs and broker fees in the initial purchase so now I'm wondering what my options are and if my plan going forward is ok.
Thanks in advance for your advice! I truely appreciate it!
Look at it from the lender's perspective: you closed, did some basic rehab and then put a for rent sign in the front yard. Did you ever hire movers? Yes, intent is a major factor, but your circumstances are weak. If it were your spouse or yourself that accepted an offer elsewhere, I would be the first one to cite "intent. " "Look, here is their job offer dated after they closed." But to say intent based on your landlord not moving into the property you are currently in, is a stretch.
This loan would be subject to the bank or broker repurchasing this loan if it is found you never moved in. How many 1000's was the loan? Occupancy fraud is the #1 mortgage fraud today. First, google " mortgage occupancy fraud" and then google "mortgage occupancy fraud enforcement.". Mortgage fraud is a felony. If a bank or broker has to buy back your loan, they will definitely cooperate with authorities, and possibly file civil suit. When lending criteria contracts or gets tougher, fraud increases. When there is a 25% increase in one particular type of fraud, federal agencies take notice and have gone to great lengths to detect this fraud.
I suspect you are seeking warm and fuzzy reassurances nothing will happen because you intended to move in. To say you aren't moving in because the house you are renting is still available.....do you see how that raises eyebrows? The way occupancy fraud is detected and proven is so very simple in our electronic age. Your intent may have been to occupy, but you made a poor financial decision based on what someone else was doing. Do not compound it by trying to cover it up. Suck it up, get legal advice now. (Which I suspect will be either move in or call the lender and plead your case).
It is not a va loan, but from what I understand I am supposed to occupy the unit. 60 days after close and for a certain period of time until I can rent it out. Also smart money, kee in mind the decision to stay at the current place is not just a simple landlord - tenant relationship. The landlord is an in law and this means no rent will be needed so financially this is a completely different situation. In addition it's a nicer house that we would prefer residing in. The only factor is that we just wanted our space as most couples would.
I am sure OP understands Lenders generally extend better mortgage terms to borrowers seeking loans for their primary residence. Owners living in a home generally tend to take better care of their homes than tenants.
The typical owner-occupancy period found in most types of primary residence mortgages runs for at least one year after the home purchase. For example Fannie Mae or Freddy Mac loans require one year of owner occupancy on mortgages it buys from lenders. Many mortgage lenders require a payment penalty if you don't occupy your home for its minimum owner-occupancy period.
What does your loan note say? The owner-occupied clause, require's you occupy your home for a specified period of time. Is that what are you seeing - 60 days after closing and for a certain period of time until renting it out?
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