A lender described a program to my partner and I who are investing in a new construction property in Florida that is due to close in November. We are located in California. A credit check showed that we are “A-type” borrowers. This lender offered a 100% financing program using owner-occupied rates. I asked if there was a rider that we had to sign to state that we will be occupying the home and he replied that there isn’t. We intend to rent the home out for at least a year and have no intentions of living in it. Is his offer really doable?
On the 1003 Application you are asked if the property is going to be your personal residence or an investment. So, if he checks investment the lender is not going to give you “owner-occupied rates” and if he checks personal residence after you have told him that you have no intention to occupy the property as a personal residence he is breaking the law…regardless of a rider or not.
If he is so willing to break the law (or so ignorant) do you really want him doing your loan? Since you are posting the question online doesnt that tell you something in not right?
Do the right thing…tell the truth and don’t let this bozo make false representations on your behalf.
Just my $0.02
This is our first investment property and we were attracted to what this lender offered us. But, when I asked and found out that he offered us an owner-occupied rate, I had an uneasy feeling about it. According to him, the lender would not check and we would be able to get away with it.
I had assumed that all licensed mortgage brokers are ethical. Thanks for your response.
Many are not ethical. Caveat Emporum… Let the buyer beware.
A similar situation was just discussed on this thread:
Funny…We (mortgage Brokers) were just discussing the honesty issue
http://www.reiclub.com/forums/index.php?board=26;action=display;threadid=9331
It would seem that honesty and integrity are the first traits to go when you get into business. 
<<According to him, the lender would not check and we would be able to get away with it. >>
Sounds like a peach! Care to share his contact information? I’d love to find a lender that will break the law for me so I can save a couple of bucks each month!
Two words: 1. Slimebag 2. Scuzzball
Well at least you had an uneasy feeling so you’re probably relatively honest. My opinion: Stay that way! Ask yourself: “What price would I put on my integrity?” If the number you come up with is equal to or less than the monthly savings, go for it. If the number is higher (or you can’t assign a dollar value to your own integrity), take the high ground! I’m thinking you’ll do the right thing.
My two cents!
Keith
Thanks for all your responses. You helped me from making a potentially costly mistake in my first real estate investment. I’m going with another mortgage broker’s loan offer.
Good Choice and Good Luck!
On a similar note…Regarding Ethics.
If you ‘intend’ to live in the home but choose not to after closing. Is that committing fraud. I have been prompted to consider this tactic by lenders before.
Is it fraud if you really intended to live there?
Then again, What if you break a hip and can’t climb the steps or something real like that? you have to live somewhere else?
Is that fraud?
That O/O rate is tempting though, isn’t it?
I had one lender say. buy two properties real quick as O/O so the 2nd lender doesn’t see the first lender on your credit report.
Beat that.