I was reading a book that talked about the 103% loans that are given to owner-occupied to help with the closing costs and it brought up a question.
With all these owner-occupied loans and incentives what would happen say if you were thinking of purchasing a home to fix-up, live in and sell in 2 - 5 years BUT a great deal came up and you got the opportunity to flip the property. Are you locked in to being a owner-occupied and losing the chance to flip, or do you wait until the paperwork is finished and then sell it? Would it depend on where in the process this great opportunity presents itself?
Does anyone have any experience or opinions on this subject?
I believe that you could sell the house at any time after buying it, but if you make a habit of doing this, it will start to look like you are using owner occupied loans for investment purposes. Which could lead to your loans being rejected, or you being charged with mortgage fraud.
TravsTX is correct. While the terms of the loan itself could make it a bad decision (i.e., heavy prepayment penalty), I’ve never heard of a loan company “forcing” you to keep a loan for x-many months/years. However, at closing, you will more-than-likely sign a paper that asks what type of property it will be used for. Like TravisTX says, if you continually (or maybe even just the first time) sign the form stating it will be OO, instead of an investment property, and then flip it, it could raise a red flag for future lenders.
The other issue to consider is whether the purchaser will be able to get a loan on the property. In the DFW area, loans on homes without seasoned (many lenders require 12 months) title are very difficult to get fundng on. This is especially true if purchaser/borrower is not A paper.
Loan Companies cannot force you to stay in a mortgage. the prepayment penalties are in place to nudge you into staying in the loan.
However, as was stated earlier, if after doing some rehab, etc. the value of the property value dramatically increases you may want to exercise your right and pay out the prepay.