Owner Occupying During Rehab

I have been considering purchasing and rehabbing properties for resale. However, most conventional loans require 25% down for investment properties, but owner occupant loans have more favorable terms. My question is would it be feasible to get an owner occupant loan, occupy the property during the rehab, and then resell? Is there any need to disclose my intentions to the bank when buying? Are there any drawbacks to his as opposed to an investment loan? Alternatively, if I decided to rent out the property after rehab, would that change my position with the bank?

They probably wouldn’t throw you in jail, but you aren’t going to get many owner occupied loans when you are applying for one every 3 moths.

If you occupy the house while you rehab, you might be able to get owner occupied insurance and that’s a good savings right there.

You are going to have to read the contract. Some say you must owner occupy for 1 year before renting; some say 2 years. Some contracts don’t specify a time period. Each bank has different paperwork.

Is there any need to disclose my intentions to the bank when buying
You are actually required to sign a document stating that the residence will be owner occupied.

They actaully will throw you in jail. If you make false statments on loan documents it is loan fraud.

I may have been unclear in my initial post, but I didn’t mean to sound like I plan on lying to the bank. I would initially owner occupy the unit and later sell or rent it out. I was asking it I need to tell the bank that I plan on selling or renting out the unit in the future.

I don’t see how selling would be a problem, since many people sell their home and use the money to pay off their mortgage.

I could see the bank having a problem with renting out the home since they would then carry a mortgage for a non owner occupied home. I read somewhere else that you need to occupy a home for 1 year before renting it out if you get an owner occupied mortgage. Does anyone have any verification on this?

To play devils advocate here… With how slammed banks are dealing with the mortgage mess, do you really think they are going to give a second though to someone paying on time and not causing them any grief?

Chances are they will never check.

Your plan is a good one. I used to sell real estate in California, and I had several clients, single young men, who were “serial rehabbers”.

They would put their lovely decorated home up for sale, and then buy the worst house on the block for their next move. That house would then get refinished floors, paint, landscaping and really tasteful furniture. It would look like a magazine spread.

I have heard from my CPA that it is good to have your owner-occupied residence as your filing address for taxes for at least 1 year.

If you have an outside job, you should be able to repeat this plan many times, always improving your equity and area, and maybe even buying duplexes, tri-plexes or quads.

Good luck on your plan. Please keep us in the loop so others can learn from you.


It’s not actually bank fraud to take out an owner occupied mortgage, live in the house, and then sell it 3 months later, cashing the bank out.

However, if you do it more than once, the banks are going to see a pattern and realize that you are buying investment properties and are not an owner occupant.

It might be bank fraud to take an owner occupied mortgage, live in the house for 3 months, and then rent the house out. It depends upon what the contract says. Then that could very well be the only owner occupied mortgage you’d get. The banks would see that you already had an owner occupied mortgage, just 3 month old, and they would assume that you are not really an owner occupant.

The last time I checked, the non owner occupied rates were not much higher, maybe another 1/2 a percent. Although, at this point, they might be requiring more money down.

It's not actually bank fraud to take out an owner occupied mortgage, live in the house, and then sell it 3 months later, cashing the bank out.

It is if you enter into the loan with the intent, to sell “FLIP” after a few months for investment purposes.