How to get mortgage.
Just curious, What is the loan amount (and LTV) we are looking at, and how far is the 2nd home from the 1st home (your original owner occupied home) ?
You want to convert your primary home to a rental property and buy a new home as your primary home.
If one lender objects to this, your loan broker should find another lender who would loan you on new purchase as primary home.
I think your explanation letter looks reasonable. In the worst case, if you are forced to purchase the 2nd home as rental, keep it for 6-12 months and refi again as owner occupied property.
The rate between owner occupied and Rental may defer anywhere from 1/2 percent to 1 percent.
So, if you like your new home and you like the price, you might have to take this hit. For every 100000 loan amount that hit could be about $300 of extra payment till the time you can refi with owner occupied rate.
But, personally, I am not seeing much issue in your case. Your loan broker just has to find someone who will be willing to lend.
It is helpful when you give information as close to real. Like instead of saying Jumbo, if you tell me the loan amount in nearest thousand Dollars, I can do a quick mental calculation and tell which option has least costs to you. And if instead of saying Big Bank, say the name of the bank, I can tell if the Bank is easy to work with. I have dealt with all like BOFA or WFB etc so I kind of understand they underwriting standards and process…
If you have not removed all contingencies, or if you still have time, you can withdraw you loan application from the big bank and work with a loan broker. Or call Rocket and UWM, the two largest wholesale lender. Working with a good loan broker might be a way to go in your case.
A loan broker deals with many lenders. And a bank or a Credit Union can only do in house loans (i.e. from their own money or credit line). I have seen people getting loans from another lender that got rejected at first with some other lender.
You did not understand the erth question.
Remember this one: Getting a mortgage for a new home while keeping the old home has additional scrutiny and additional qualification that restricts your purchase.
You need to qualify with combined LTV (CLTV), combined reserve cash (free cash after the mortgage is approved) may be 6 to 12 months, then bank may require 25% down payment than 20% regular one…etc
It is pretty difficult task to go through. With current standards, banks are extremely careful/strict on such requirement.
Are you going to rent your current home (tough to qualify) or sell your home (easy to get mortgage).
CLTV = Both homes together LTV must be 75%-80% (or even 75% for current home and 80% new home)
Banks wont consider rent unless you have 2 years tax filed rental history
Your CDTI (Combined debt to income) must be less than 43% assuming zero rent (very tough to qualify).
Sorry to say this => There are brighter chance that your mortgage may be rejected in your do not qualify the loan. Following ballpark figures may help (but it depends on your institution and underwriter). The rules would have changed as I am not 100% right on these.
Better to seek a right mortgage and inform all your details upfront. You need to decide everything before you contingency period is over.
Replied your message. The person in the message should help you get your loan.
Before reading, bear in mind the old phrase from “The Godfather” - “It’s not personal Sonny, it’s just strictly business”.
You’re about to commit occupancy fraud on the lender you refinanced with. Look through your closing documents for the occupancy certification and you’ll soon see what I mean.
The ethical way to do this is to purchase the new home as a rental property. Yes it means either more capital invested and/or a slightly higher rate, but this is the way to do it right.
In 10 months you can apply for an Owner Occupied refinance providing that you’ve switched mailing addresses on your W2’s, bank statements, and credit card bills. Your 2021 return should be filed from that address also.
You will be asked to explain the recent credit inquiries (90 day look back is common) so even if your explanation letter was written in the blood of your first born, and the page was stained with your very tears, the Underwriter will not accept the reasoning behind what you are doing. Why should they? If you defrauded one lender already, what’s stopping you from doing it again? Yes, that’s a harsh view of things, but that’s what we have here.
Bite the bullet. Do the right thing here so you can sleep well at night.
To all: Ever wonder why sometimes it seems like a lender will question everything, up until the point of requiring a DNA check swab at close of escrow? It’s because of fraud issues like this. Lenders and their investors want to minimize risk, and occupancy fraud is the largest issue in the business today.
Thanks for reading,
Fraud is when you knew/intended something before the fact but concealed it to achieve an outcome.
Not when after the fact situation changes. This is a fine line. Hard to prove one way or the other. Legal conflicts and moral conflicts are sometimes difficult to reconcile.
An interesting trivia. Forgot the name of the person who won Noble a few years ago on asymmetry of information leading to Moral Hazard and Adverse Selection.
If there is a signed acknowledgement stating that the borrower is expected to live in the property as their primary residence for the next 12 months, yet moves into a similar property within a short distance also saying it’s owner occupied, it’s textbook fraud.
If there was a required relocation by an employer, an issue of heath etc - dramatic and documentable stuff -then exceptions are made.
From the description so far, these things do not exist. You can always plead your case to an Underwriter, but be ready to have the terms changed on the purchase loan to something less favorable. Assuming a buyer closes as a Non-Owner Occupied and then moves into the new home right away, the risk of the prior home lender finding out about this fraud expands geometrically. The first tip off? Assuming the other property will be rented, the hazard insurance will need to reflect the home as not a primary residence. The lender on that home will get an updated insurance binder. That’s where the trouble begins, and grows from there.
To be crystal clear… There is a very good chance this will not be discovered. Let’s say you have a 95% chance it won’t. Now assume you are travelling by air to Hawaii and the pilot gets on the intercom before taking off and says “We have a 95% chance of landing on Maui today…” Would you still fly?
Thanks for reading
That is why I said this case is mix of moral conflicts and legal conflicts. Legally, the borrower might be able to get by depending upon the circumstances and documentation. Morally, s/he may not be able to get by if s/he did all this knowingly. It is same as what many people did during 2008 market crash. They surrendered underwater homes in 2008 market crash when they could have very well paid the mortgage and kept the home. Because the deed allowed them to do so though morally they should have not.