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The courts in my neck of the woods have seen more than a few prosecutions of folks that have defrauded lenders. With electronic recording of deeds and liens it does not take much effort for a lender to gather evidence that a borrower is not occupying a property. If the borrower is a seamster it is no wonder that the lender wants a criminal conviction to scare off others.
The OP on this thread seems kinda unaware that the higher fees / rates for non-owner occupied properties are there due to higher risks. With people still looking to "sneak by" with an owner occupied loan on an investment property it is no wonder that many lenders have severely clamped down on all loans...
If the rates and fees are higher for an investment property, can't you just say it will be owner occupied? Besides bending the truth it seems that there wouldn't be many ways they could disprove what you said.
We have borrowers sign an occupancy certificate where they have to indicate what type of occupancy the property will have. It states in bold that mortgage fraud is investigated by the FBI and is punishable by up to 30 year in federal prison or $1,000,000 fine or both.
So, probably not worth it. Plus a good lender will be able to figure out your intentions and catagorize it properly.
Uh, hate to be the party pooper, but occupancy fraud is the number one fraud offense in mortgage crime. It would be counter intuitive for me to share how the buyer is caught and one would only compound their stupidity by thinking occupancy won't be checked. But I will tell you residential mortgage fraud is now being prosecuted as a federal class E felony. If it can be proven the loan officer or realtor was aware of the fraud, jump to the front of the line as a class 1 felony and conspiracy charges.
Giving bad advice, encouraging someone to commit a crime online, should also be a crime.
From my research the below seems to be an accurate statement. I was wondering if we can get a better rate or fewer Points with a higher Down Payment, say like 50%?
Quote:
Originally Posted by AndrewSoss
Okay, here's the deal with investment properties.
Assuming it's a single family (1 unit) not a duplex or triplex, etc..
You can get rates similar to what you can get on an owner occupied property, but the fees are significantly higher.
The 'hit' (additional fee) for an investment property with 25%+ down is 1.75% of the loan amount. If you are only putting 20% down, it's 3.00%!, so that extra 5% would be prudent.
You used to be able to take a higher rate to offset the increased fees, but a couple things have happened.
First off, the fees were greatly increased last fall. They used to be about .50% - 1.00% depending on down payment.
Secondly, the amount that you have to increase the rate to offset the fees are obsurd due to what is called 'stack compression'.
It's a fancy way of saying lenders aren't giving as much credit for an increased rate as they used to.
How it works when you are taking an increased rate is that the entity who is purchasing the mortgage pays a broker/loan officer a premium for delivering a higher than market interest rate. The broker then uses this premium to offset the various 'hits' (investment, credit score, low downpayment, etc..) so that the borrower doesn't have to pay high fees (or it at least gives the borrower an option to pay fees and get a lower rate or not pay fees and take the higher rate).
There are two ways to look at this:
a) it's difficult for people to obtain high rate, low fees financing
b) it's cheaper than it used to be to buy down to a lower rate
With 25% down, and good credit, you should be able to get a 30 year fixed at around 5% with around 2pts. 4.5% would probably be around 3pts.
As it's been suggested, lenders have a matrix of the add-ons (and credits) for various lending situations. With 25% down on a non-owner occupied property, the add-on is 1.75% (points). The maximum credit for a low LTV (60%) and credit score is .25 for a net add-on of 1.50% add-on. The other common variables in determining cost include: length of lock, state (for some investors), escrow waiver, high rise condo, or condo over 75% LTV. Your lender may vary slightly.
With it not yet certain real estate is an appreciating asset, many financial advisors will not recommend 50+% be put down on an investment property (of course certain situations are exceptions). Once the home is bought, it's very difficult to get that cash back out of the property.
I didn't "Bend the truth" on an investment property recently and it cost me dearly. Northwest Community Credit Union and all agents involved put my wife and I through the ringer. My dad commited suicide so I came home from overseas and started to purchase his home to keep my mother off the street and their home out of forclosure. My little brother was in an accident and lost his right arm to boot and I was told I could purchase the house with 3 % down at 4.25% intrest. Long story short they told me that beings as my dad and I were related I didn't qualify for the loan because we might be scamming the system. They said I could buy the house at 5.25% with 20% down. I came up with the 20% down and they then told me that beings as I was buying the house with the intent to let my mom live there (which they knew from the beginning) it was an Investment piece so my rate would now be 7% intrest with 20% down. With no time extensions left for the short sale, i had to take what they gave me. My insurance also went up. They all commented on how rare it was for a young couple to be so honest to do things right. Their commpliments felt more like a kiss on the neck as they bent me over.
If the rates and fees are higher for an investment property, can't you just say it will be owner occupied? Besides bending the truth it seems that there wouldn't be many ways they could disprove what you said.
Lenders are very strict about everything nowadays so it won;t be possible at all.
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Can we get Lower Rate for Higher Down Payment?
