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Re-fi property as owner-occupied primary residence then moving out and renting it as investment prop within a few weeks of close?

I am working with a mortgage lender on cash-out refinancing my FHA loan into a 30-yr fixed conventional mortgage. The property is currently my primary residence and has been since I bought it 5 years ago. I intend to move out of the property within the next 6 weeks, after loan closing, and renting it out. The loan officer I'm working with has cited no issues or legal implications for doing the re-fi as owner-occupied primary residence - and then turning around and renting it out after closing. Are there issues or legal implications in this scenario? by jennifer.hoops95 from Winona, Minnesota. Jul 17th 2014 Reply


Tim Swierczek (TimSwierczek)
#23 ranked lender in Minnesota - 25 contributions

Hi Jennifer,I would not recommend it. This is fraud. You will be signing forms at closing that your not likely to read, but they state that you live in the property and intend to live there for at least 12 months. I'm guessing you have already listed it for rent, but even if you haven't this is fraud. I know it might not seem like a big deal, and in fact you will probably not get caught it is still not legal. It sounds like your loan officer is not truely versed in the law.Lastly, this will prevent you from doing an owner occupied purchase for 12 months. Lenders do multiple background checks on you that you are not aware of, and one of those is called a MERS report. It will tell any lender that you took out this loan and they will not give you an owner occupied loan for 12 months. Sorry, but do it the right way.

Jul 17th 2014
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Nik Green (NikGreen)
#64 ranked lender in Minnesota - 6 contributions

Hi Jennifer,Like Tim said, "This is fraud. You will be signing forms at closing that your not likely to read, but they state that you live in the property and intend to live there for at least 12 months." Fraud is nothing to mess with! Your current Loan Officer shouldn't be telling you that is okay. You might want to rethink who your working with, trust is one of the biggest things when it come to anything financially. Thanks, for reaching out to someone else. Do things the right way and everything will work out better in the long run! Good Luck.

Jul 17th 2014
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David Kosmecki (david_kosmecki)
#35 ranked lender in Minnesota - 259 contributions

You are very wise in asking this question. At closing you will be signing several documents which indicate that you will be occupying this property as your primary residence. The document legally is asking your intent. If you have made plans on your move of any kind, your intent is NOT to occupy. A certain portion of the loans are pulled for auditing also the servicer has several other ways in the course of business to determine if you are owner occupying. In essence you would be committing FRAUD.Yes you can plead ignorance or blame your loan officer but these will not hold up in court or to prevent the loan being called immediately due.If your loan officer is telling you this and fortunately you are questioning it. What else has he/she told you that you didn't question. I would run from that person, cancel your loan and work with someone you can trust!

Jul 17th 2014
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Steven Ceceri (123LoanYes)
#12 ranked lender in Rhode Island - 723 contributions

Hi Jennifer! You should check with a real estate attorney on this matter as your loan officer is not able to provide you with legal advice, but should encourage you to seek this advice for clarification. I believe that the as long as you are providing accurate information in your application on the date you applied up through the time of closing, you should be fine. There are no questions on the application that ask if you are going to move out within a certain time frame after closing, as the questions are geared to your current use. Again, check with an attorney to have a legal opinion on the matter just to cover yourself!

Jul 17th 2014
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Joe Metzler (JoeMetzler)
#17 ranked lender in Minnesota - 4,848 contributions

You are committing mortgage fraud if you refinance the property as owner occupied when knowingly about to turn it into a rental. The key is knowingly... Let's look at it differently. Assume you refinance today, and a year from now you take a new job in another state, then turn it into a rental... No problem. As MN's top lender on Lender411, feel free to call for more information.

Jul 18th 2014
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Sean Young (SeanYoung)
#1 ranked lender in Colorado - 1,112 contributions

If that is your intent you should look at refinancing your property as an investment property instead. This way you are staying within the law.......... Do people do this and not get caught?... Yes!..............Is it worth risking you getting caught?... No!....You will be signing documents at closing including a FBI fraud document that specifically says do not commit mortgage fraud.

Jul 19th 2014
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