Board Topic: Owner occupied mortgage for rental property?
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Owner occupied mortgage for rental

Posted by: Dan Oct 8 2003, 11:06 AM
Is it OK to apply for a mortgage and then have a change of plans and turn around and rent the property? I am trying to buy my first rental property and dont have much of a down payment. A bank will lend to me for owner occupied home. Then I want to rent the house. Is this legal? Any experiences with this kind of plan? Thanks very much,
Dan

Posted by: loanuniverse Oct 8 2003, 06:21 PM
The occupancy type of a mortgaged property indicates how the mortgage
borrower will use the property. There are generally three types: owner-occupied; second home; and non-owner-occupied properties {rental properties}. A conforming mortgage loan, which seems to be what was offered to you will most likely have this requirement. The underlying reasoning for the low down payment is that owner-occupied properties have a lower rate of default. I think that they also benefit from a lower level of insurance premiums, but I am not 100% about this.

To do this transaction on the level, you should ask the lender to tell you the length of this requirement before hand. It could be as low as 45 days or as long as a year.

Although the lender will rarely check after closing, I would not recommend that you try to rent it right away without moving in to fulfill the occupancy requirement.

Hope this helps.
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