Question for a friend of mine.
If he wants to purchase a house for investment and has no primary residence. Should he approach the bank as a first time homebuyer or investor? (the house he wants is currently occuipied and he lives with someone rent free with no mortgage) So he dosent want a house anytime soon.
Howdy MsFLinvstr:
If it is going to be a rental property he needs to apply for an investment loan. No sense risking jail time or lawsuit or having the loan called to save a few bucks.
If he is not going to live in the property then it needs to be investment.
tedjr
“No sense risking jail time or lawsuit or having the loan called to save a few bucks”
Jail time? Yikes!! Are you saying that applying for a primary residence loan when purchasing an investment property can land you in jail?
Potentially. It is classified as fraud. The Lender would probably need a reason to review or send someone to verify occupancy. But I have heard of this happening more frequently. 
Lenders are getting tired of foreclosing on property and are taking steps to make sure that they have more control. Buyers and appraisers and Realtors have gotten together and ripped them a big one in several cases pending. Now new guidelines has been enacted such as seasoning. Old rules that were never enforced are now being watched carefully by HUD and other govt officials as well as the lenders. It is not a good time to be on the wrong end of a fraud investigation even if it something as innocent as not living in a property that you buy as an owner occupant. You may want to document things a little better.
I can always count on Ted to tell me the right way…Thanks! I would have never thought that it was fraud. Just an innocent little lie…
First time I have met someone that wanted to invest first and not purchase a home for themselves.
This should be put together in a way that the lender is satisfied with. Lenders and banks are getting more flexible and some have no seasoning, some require seasoning. Some have stated programs where we state the income within reason in order to make a certain debt ratio satisfied by the lenders guidelines. You’re not going to land in jail over an address change. Some lenders will allow you to purchase on a primary residence provided you have mail sent to this address. Whilest it still stands true that ethically if you do not plan on living in the house as a primary residence then obviously you have an investment property or a second home loan scenario. However, truthfully, this does not stop some from purchasing investment property as primary residence or second homes. The difference is in the program applied for by the purchaser and the program approved and accepted for by the lender. If the lender is satisfied with the loan package and you the buyer are able to maintain the property and establish payments on time, then why would you not at least try and get the deal done? This is a capitalist society. We are not lending money in a cookie cutter fashion these days. Keep in mind you can get all the advice here in this forum, but when it comes down to it, it is up to the lender to take the risk, not the commentators.
Although, we are ethically and morally challenged every day, we are in the business of lending money and sometimes you’ll find a bank that believes in your overall credit worthiness so much, that they are willing to take that risk. ( ie, stated programs) Any other loan officer telling you different would be lying to you. That’s why we are loan brokers. We are the one who fights for your approval. We put together your loan application in order to sell an approval to a financial institutions underwriting guidelines. A good loan officer knows how to communicate with their lenders and knows how to get the deal done.
I understand the temptation to save a little on rate by purchasing as owner occupied rather than Inv. Prop, but if you were to calculate the minimal difference in payment and weigh it against the risks, I think that you might re-consider and just do it strait. Especially when you can get 100% No income loans on Inv. Properties and might be looking to sell it shortly anyway! If you’re “Stating” inflated incomes, or lying about your intent to occupy, it’s going to bite you in the long run one way or another. Maybe just on future purhases, maybe a loan will be called in, or maybe the IRS will request a copy of your 1003 and bill you for the tax on the income you certified to be true and correct! Just an FYI…over the last few years, more and more services have popped up in the industry that check for identity fraud and other types of verifications that, if completed, makes the loan more saleable on the secondary market. One of the newest is a post-closing check to the utility companies as to who applied for service on a particular property. What this means to you is that if you buy it O/O, but rent it, and your tenant applies for utility service, the lender will question who lives there! If you’re in for the long haul, do everything you can to tell the truth! Good luck! Sandra