Owner Occupied Homes: Requirements For Owner Occupied Mortgage Loans
The best mortgage rates and terms that is out there are for owner occupied homes where the mortgage borrower intends on living in the home they are buying. Owner occupied homes require the least down payment and mortgage lenders offer the best mortgage rates for owner occupied homes. Mortgage rates for investment property homes are substantially higher and a minimum down payment of 20% is required. Owner occupied homes only require a 3.5% down payment for FHA loans and 5% down payment for conventional loans. If a mortgage loan borrower applies for a owner occupied primary residential mortgage loan, they are required to occupy the property for a minimum of one year and need to move in to the subject property within 60 days of closing on their home.
Lying That It Will Be Owner Occupied Mortgage Loans When It Will Be Investment Home
What happens if you lie and state on your mortgage loan application that you are applying for an owner occupied home loan when in fact you are applying for a second home loan or investment home loan. Many investment home buyers think of creative strategies in trying to reinvent the wheel via creative financing and see if they can try to beat the system so they can just come up with the 3.5% down payment and get the lower mortgage rates available for owner occupied homes. They feel that it will not hurt anybody as long as they make their mortgage payments on time and do not default on their mortgage loans. They justify it that they just want the best deal and strongly feel that they are not hurting anyone. Unfortunately, it is not that simple and both the government regulators and mortgage lenders take this extremely seriously.
Owner Occupied Homes: Consequences Of Lying About Owner Occupied Home
The reason owner occupied homes have lower down payment requirements and lower mortgage rates is because studies prove that owner occupied homes have lower risk factors for the mortgage lenders. Investment properties have higher risk factors so that is why mortgage lenders and government mortgage lending guidelines are stricter with higher down payments ( Minimum 20% down payment ) and mortgage rates that are 0.50% to over 1.0% higher than owner occupied homes. Most people will do whatever necessary to save their primary residences than they will with their investment homes because they need their shelter and a home for their family. Investments can be lost and remade at a later date. Mortgage lenders will go by the information you state on your mortgage application and when you state that your intent is to be an owner occupant, that is how they are going to assess the risk on your loan. If you have no intention on being an owner occupant but stating it as such and intend on keeping it as an investment home, you have just misled the mortgage lender and committed mortgage fraud. Fraud is such a strong negative word and there a many people that feel that lying about cases like this is not a big deal. Unfortunately, it is a huge deal and the consequences can be severe if the mortgage lender ever finds out and wants to make a big deal of the case.
Mortgage Fraud: Lying About Owner Occupied Mortgage Loans Is Considered Mortgage Fraud
A person can be accused and prosecuted for mortgage fraud even though he or she has not defaulted on a mortgage loan but lied on your mortgage application to mislead the mortgage lender to get favorable mortgage terms and rates. The mortgage lender does have the discretion to check on a new homeowner following the closing to see if the mortgage applicant is living on the subject property. All owner occupied mortgage loan borrowers need to sign a certification that they intend on occupying the property once they close on their home.
Owner Occupied Homes: What Happens If You Get Caught Lying On Owner Occupied Mortgage Loans
If you get caught lying about owner occupied mortgage loans, the mortgage lender can call the mortgage loan and demand that you pay the balance of your mortgage loan in 60 or 90 days. If you do not have the cash to pay the outstanding mortgage loan balance, you need to refinance the owner occupied home as an investment home and pay the primary mortgage lender who is demanding the payment of the balance. If you cannot get an investment home refinance loan, they might ask you to surrender the subject property. The mortgage lender can also turn you in to the Federal Bureau of Investigations ( FBI ) and the FBI can work in conjuction with the United States Attorney’s Office in your District to investigate you and potentially prosecute you for mortgage fraud. Getting investigated by the FBI is a very serious deal and it is not like getting a building violation citation or a traffic ticket. The Feds are the real deal and they take any mortgage fraud investigations extremely seriously. Maximum penalty for severe cases of mortgage fraud is 30 years in federal prison. Lying on a mortgage application is not worth the potential consequences that might arise if you get caught. It is not worth the risk.