Moving To Another Owner-Occupied Home Without Selling

In this blog, we will cover and discuss buying and moving to another owner-occupied home without selling their first home. There are strict rules and mortgage regulations with owner-occupant home financing. Gustan Cho Associates get countless calls from potential homebuyers about Moving To Another Owner-Occupied Home Without Selling their first home. There are several variables we will cover in this blog on moving to another owner-occupied home with selling your first home.

Moving To Another Owner-Occupied Home Without Selling My First

Are you planning on keeping your first home after moving to another owner-occupied home? One of the most frequent FAQs is how can I buy a second home without selling my first. The important question is can you buy another owner-occupant primary residence home? Why are you moving to another owner-occupied home?

How Far From First Home Moving To Another Owner-Occupied Home

How far is the second owner-occupant home you are buying from the first?  Lenders want to know the reasoning for moving to another owner-occupied home that is a short driving distance away. You can always buy a second owner-occupied home that is not far distance from the first but to qualify it as an owner-occupant home, it needs to make sense.

Benefits of Owner-Occupied Financing

Owner-Occupied financing has huge benefits over investment home financing. Besides the down payment requirements which range for zero to 5 percent mortgage rates. the overall terms of the owner-occupied financing far outweigh mortgages for investment properties.

Why Are You Moving To Another Owner-Occupied Home?

If the home is back-to-back or within a short driving distance, what reason do you have to think that the lender will believe it will not be an investment home? The deal needs to make sense. Are you downsizing due to children being grown and on their own? Are you moving to another owner-occupied home to upgrade due to a growing family? Did you get married or divorced and need to upgrade to a larger home or downsize to a smaller home? There are other reasons besides upsizing or downsizing a home that makes sense to the lender and underwriters. Mortgage underwriters will want you to write a letter of explanation if you are moving to another owner-occupied home and explain occupancy.

What Are Some Reasons Mortgage Underwriters Find Owner-Occupancy Acceptable

You will need to write a letter of explanation to the mortgage underwriter explaining moving to another owner-occupied home without selling the first. Let’s go over the three occupancy types first so we are all on the same page with federal occupancy mortgage laws and regulations:
Here are some key points to take into consideration when you are writing a letter of explanation to the mortgage underwriter. The point is to explain you are moving to another owner-occupied home because you will legitimately be living there.

Can I Get Approved For Another Owner-Occupant Home Due To New Job?

Are you moving to another owner-occupied home due to being closer to work? Are you moving to another owner-occupied home because of needing to take care of elderly parents? Are you moving to another owner-occupant home due to being closer to medical facilities due to long-term health issues? Moving to another owner-occupied home needs to make sense to the new lender and borrowers need to follow the owner-occupant rules.

How Do I Write a Letter of Explanation For Occupancy?

If you are moving to another owner-occupied home without sell the first or are intending on keeping the home as an investment rental home, the lender will require you to write a letter of explanation for occupancy. According to Margarett Jurilla, the Regional Branch Operations Director at Gustan Cho Associates this is what she had to say:

The letter of explanation should be simple and to the point. Mortgage underwriters do not care for long multi page letter of explanation. The LOX should be a few sentences. Try to make the LOX in a bullet point form. It should be legible, easy to follow with dates on each chain of events. The letter of explanation should be provided with facts and supporting documents.

As of writing the letter of explanation to the mortgage underwriter, Marga advised the following:

When a mortgage underwriter asks for a letter of explanation, please stay focused and narrow the narrative to the subject matter at hand. A letter of explanation should never be long. You are not writing an essay. Just a factual chain of events with proper dates. Underwriters do not care about stories and want facts. Supporting documentation will provide validity to the letter of explanation. If you want the underwriter to believe you are moving to a new home and keeping the exiting home as a rental, provide facts, and documents stating why the underwriter should believe you.

When writing a letter of explanation, consider it like you are in a court room and need to convince the judge and jury that what you are saying is facts and not fiction.

What Are The Owner-Occupant Financing Mortgage Rules?

Whether you are moving to another owner-occupied home and selling your first home or keeping it as an investment home, the owner-occupied housing rules need to be followed and abide by. Here is what Michael Gracz, a loan officer assistant at Gustan Cho Associates says:

Primary owner-occupant homes are considered the safest investment for lenders. In the lending world, the safer the investment, the lower the risk, therefore the lower the rate. The riskier the borrower and property, the higher the rewards which means the higher the rate. Owner occupant homebuyers need to move in the property within 60 days of the closing date and occupy the property for at least a year. After one year, they can rent the property and purchase a different owner-occupant home.

The bottom line is owner occupant homes have lower down payment requirements and lower mortgage rates. Investment property homes require a 20% down payment and have substantially higher mortgage rates.

Owner-Occupant Versus Investment Home Financing Guidelines

However, the reason why you are moving to another owner-occupied home needs to make sense to the lender and mortgage underwriter. The mortgage underwriter truly needs to believe that your moving to another owner-occupied home will be your new first home and not an investment property.

How Can I Come Up With The Down Payment For Moving To Another Owner-Occupied Home 

Once the reason has been made and it is believable that moving to another owner-occupied home is a primary home and you will be selling your first home. Another reason to come up with the down payment and closing costs when moving to another owner-occupied home without selling first is to sell valuables. Such as a second car, jewelry, collectibles, or memorabilia.

Selling Your First Home After Moving To Another Owner-Occupied Home?

Are you planning on selling your first home after moving to another owner-occupied home? Or are you planning to turn your first home into a rental after moving to another owner-occupied home. In the following paragraphs, we will discuss moving to another owner-occupied home without selling your first. We will go over how to obtain a second mortgage on a new owner-occupant home. We will cover what happens with the mortgage of your first home when you are planning to move to another owner-occupied home.

Moving To Another Owner-Occupied Home Without Selling My First

Many borrowers are asking whether they can qualify for a second primary owner-occupant home without selling the first home. Most home buyers want to purchase their homes as owner-occupant homes. The main reason is that owner-occupied home financing offers the best mortgage rates. Owner-occupant homes require the least down payment on a home purchase.

All government loans are for owner-occupied homes only. Buyers of second homes and/or investment properties cannot purchase these types of properties with FHA, VA, or USDA loans. Only conventional loans allow for second home and investment property financing. Lenders view owner-occupant homes as being with the least risk. Homeowners will be less likely to bail on their owner-occupant homes when things do not go well with them financially than they would on second homes and/or investment properties.

Consideration When Buying and Moving To Another Owner-Occupied Home

http://www.youtube.com/watch?v=Zl1UYg9Pbr0&ab_channel=Gustan Cho Associates-MortgageBankers

Home Buyers who currently own an owner-occupied home and are thinking of moving to another owner-occupied home and are either selling the existing current owner-occupied home after they move or keeping it as a rental, there are several things to take into consideration. First, the purchase of another owner-occupied home needs to make sense.

Moving To Another Owner-Occupied Home Due To Job Transfer

For home buyers who got a job transfer that is 60 miles or further from their current home, then the deal makes sense. They will most likely qualify for the new home purchase by going the owner-occupied route. They can qualify for Two FHA Loans At The Same Time if the new home purchase is at least 100 miles away and the reason for the move is due to a job transfer. However, if home buyers are purchasing another home that is close to the current owner-occupied home and the new one is the same value and size, then the deal does not make sense.

Consideration When Qualifying For A Second Owner-Occupant Home Mortgage

On the other hand, if the new home purchase is nearby the current owner-occupied home but it is substantially larger and the reason for the move is because the family has outgrown the current owner-occupied home, then the new home purchase will qualify as an owner-occupied home.

Upsizing or Downsizing Home Due To Change In Size of Household

By substantially larger, we are talking at least a 30% increase or greater in square footage. It can be other factors as well such as downsizing to a townhome or condominium or smaller home due to the borrower’s children no longer living with the borrower. Before buyers decide on purchasing another home as an owner-occupied home, check with a mortgage lender and see if they can do the deal as an owner-occupied home. There are other considerations that you need to think about.

Purchasing and Moving To Another Owner-Occupied Home

If you intend on keeping your current owner-occupied home and buying another owner-occupied home, you need to qualify for both mortgage loans. There are instances where having two mortgage payments can disqualify you due to going over the required debt-to-income ratio requirements. One way to solve this problem will be to state that the first owner-occupied home will be a rental and that the home buyers will be renting an existing home after they move to a new owner-occupied home.

Can I Use Rental Income From The Vacating Primary Residence?

A frequently asked question we get at Gustan Cho Associates is can I use rental income from the vacating primary residence. In order to do this, mortgage lenders require that the exiting home have at least a 25% equity on the first owner-occupied home. If not, homeowners do not have to refinance. But need an appraisal done on the first owner-occupied home and pay down the mortgage loan so that the loan to value is at 75% and there is 25% equity. The appraiser will list the market rental rate for the home and the mortgage lender will use 75% of the market rent as rental income.

How Do You Use Rental Income As Income When Qualifying For New Mortgage?

Another frequently asked question at Gustan Cho Associates is how do you use rental income as income?  There are many cases where a homeowner has an owner-occupied home but rents the home and live elsewhere. Cases like this are common where the homeowner gets married and live with their new spouse and rents out their current owner-occupied home.

If the exiting home will be used as a rental home and the borrower would need additional income to meet debt-to-income ratio caps, they can use up to 75% of the potential rental income. If the borrower has a lease with a security deposit, they can provide the executed lease and the copy of the canceled check. The lender will request the appraiser for the average market rent for a comparable property.

Rental Income Can Be Verified With Rent Lease

If the homeowner has a rental lease and has been declaring the rental income of their owner-occupied home for at least two years on their tax returns, then the full rental income declared on their tax returns can be used. In this particular case, 100% of the rental income can be used and not 75% of the market rent since it has been declared on their tax returns.

Qualifying For Mortgage With Mortgage Lender With No Overlays

Home Buyers who need to qualify for government and/or conventional loans with a national mortgage company licensed in multiple states with no overlays on government and conventional loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates has a national reputation for not having any lender overlays on government and conventional loans. Gustan Cho Associates are also experts on non-QM loans and other alternative financing loan programs for owner-occupants, second homes, and investment properties. We are proud to have a reputation of being a one-stop lending shop.

This article on moving to another owner-occupied home without selling the first home was updated December 20th, 2022.