No. of Recommendations: 0
hello all,

I am about to purchase my first house. It is a nice, well-located property in Miami, FL. The property costs about 240K, and with a 3.75 APR and 10% down, my monthly payment is about $1,750. On the other hand, I could put 20% down, get rid of PMI and reduce my monthly payment to $1,540. The property can be rented anywhere from $1,700 to $1,950+ a month. First I want to rent it and maybe move in there in a few years down the road.

Would you recommend 10% down and break even every month, or 20% down and have a positive cash flow of about $300 a month?
Print the post Back To Top
No. of Recommendations: 0
The property costs about 240K, and with a 3.75 APR and 10% down, my monthly payment is about $1,750. On the other hand, I could put 20% down, get rid of PMI and reduce my monthly payment to $1,540. The property can be rented anywhere from $1,700 to $1,950+ a month. First I want to rent it and maybe move in there in a few years down the road.

Is this an investor rate???? If you intend to rent it out, you need one.

IP
Print the post Back To Top
No. of Recommendations: 0
Do I get a different rate even if my final goal is to live there?

Also, what do you think of the down payment options?
Print the post Back To Top
No. of Recommendations: 0
Would you recommend 10% down and break even every month, or 20% down and have a positive cash flow of about $300 a month?

I think a reasonable rule of thumb is to assume that you will require 1 month's worth of gross rent each year to cover vacancies and minor repairs between/during tenants. On top of this you may have longer term expenses like HVAC repairs, roof, siding, etc... I mention this because it sounds like you may break even on gross rent vs. mortgage, but not necessarily vs. your monthly costs... are you, as a LL, responsible for water? sewer? trash pickup? yard maintenance? any HOA dues/requirements? What is the general condition of the house and systems? Have you considered your insurance costs--since being a LL will increase the property insurance and you should also plan on having an umbrella policy of sorts to cover yourself and other personal assets from litigation connected to the rental.

On the other hand, if any expensive costs/repairs come due within a year or two the fact that you may be ahead $300 most months could easily be insufficient to handle it, so in that case unless you have other savings available, having that $24,000 chunk of cash on hand could float you though a major repair, or extended vacancy.

Will putting 15% down reduce your PMI at all, maybe you can split some of the difference?
Print the post Back To Top
No. of Recommendations: 0
floridaInvestor1: "I am about to purchase my first house. It is a nice, well-located property in Miami, FL. The property costs about 240K, and with a 3.75 APR and 10% down, my monthly payment is about $1,750. On the other hand, I could put 20% down, get rid of PMI and reduce my monthly payment to $1,540. The property can be rented anywhere from $1,700 to $1,950+ a month. First I want to rent it and maybe move in there in a few years down the road."

If you plan "maybe to move in there a few years down the road," you are buying an investment property, not a personal residence, and I seriously doubt that the financing you discuss is available for anything other than owner-occupied 1-4 family homes.

I suspect that you will need more like 25-30% down and that the interest rate for an investment property will be higher.

Regards, JAFO
Print the post Back To Top
No. of Recommendations: 1
You would have to live there first and then rent it out after a certain period, but when your initial intention is to rent, you have to get an investor mortgage. When I refied my primary residence this summer, I had to sign a paper stating that I did not intend to rent for at least 12 months. If you sign such a document knowing you are going into this with the intent to rent, that is fraud.

Investor rates are about a half point higher, and will probably require 20-25% down for a decent rate. That at least has been my experience. Perhaps some of the mortgage brokers on board can give you a more full view.

IP
Print the post Back To Top
No. of Recommendations: 0
Hi floridaInvestor,

As a *FINANCIAL* rule of thumb, in the current rate and property markets, you want to put as little cash into your real estate purchase as possible.

If you are buying this without the intention to immediately occupy as your primary residence within 30 days of closing, you cannot (non-fraudulently) apply and close with primary residence finacning terms. You must accept investor financing terms.

Investor terms are 20% down on a SFR.
3.75% *IS* available for investor financing (as of a few minutes ago ;~)

Helpful?
Dave Donhoff
Leverage Planner
Print the post Back To Top
No. of Recommendations: 3
I am about to purchase my first house. ...
I want to rent it and maybe move in there in a few years.


Ho boy!!
Where are you getting your advice from?

This is your very first home purchase -- and you intend to rent it out -- and you don't currently live in the area (I'm guessing on this last bit)?

Unless you are very very very very lucky, you are going to be getting an expensive education. I suspect that there are a whole lotta things that you don't know--and you don't know that you don't know them.

First, as others have said, the terms for an investor loan are not as good as owner-occupied. Higher down payment, higher rate, higher fees.

In many areas (don't know about Miami) property taxes are higher for a rental house. Insurance is higher, too. It's no longer "homeowner's insurance" it's "fire insurance". I suspect that this is MUCH higher in Miami, what with hurricane losses, etc.

Then the rent amount. You claim $1700 to $1950. That's such a wide range that it leads me to believe that you don't really know what it can rent for -- you are just guessing or relying on a realtor. Hint: realtors lie about how much rent you can get, and how easy it will be to rent.

It doesn't seem like you have taken into account vacancies and maintenance. A clogged up toilet isn't going to fix itself. The tenant will be calling YOU to fix it. If you will have to call a plumber, how much will they charge you?
Print the post Back To Top
No. of Recommendations: 0
Hello all, thank you for your replies!

Actually, I currently live in the same residential complex as where I am about to purchase. The monthly payments that I mentioned ($1,750 with 10% down or $1,540 with 20% down) actually take everything into account: mortgage, insurance, taxes, association fees, PMI, etc. I believe these estimates to be very accurate (give or take $50). The rent range $1,750-1,950 is broad in the area and it has been going up recently. The only thing that I cannot possibly estimate are potential repair costs, but the general condition of the house is very good (engineer already looked at it).

What I had no clue was that the lending rates vary depending on what you intend to do with the property. I actually had asked the lender representative if the fact that I might rent it make any difference and she said NO. Curious. The realtors did not mention anything about this either and they know what my plans are, however, i guess they are expected to avoid mentioning anything that might make me back down. I need to do some research about this. I haven't signed anything that prevents me from renting the property, of that I'm 100% sure.

So you think in general I would want to put the lowest down payment possible? My main question is whether you think its best to have a lower down payment and a neutral cash flow (maybe negative with repair costs) or a higher down payment and a positive cash flow (maybe neutral with repair costs)?

... and if I need 30% down, the deal is off
Print the post Back To Top
No. of Recommendations: 1
Hi fInvestor,

Actually, I currently live in the same residential complex as where I am about to purchase.
So... safe to assume you rent, then... and assumedly at a rental rate you feel is less than living costs as an owner? Why not (with your landlord's permission) remain responsible for your lease, and sub-lease to another tenant... then buy & occupy the other place as your true residence?

If you did that, you could get a long term rate currently around 3.5% with just 5% down, and no monthly PMI payments. (And although both mortgage interest and PMI are both tax deductible, the risk of that deductibility ever going away is higher against the monthly PMI, and the actual costs of mortgage insurance is lower by financing a single premium design on a 95% loan.)

I haven't signed anything that prevents me from renting the property, of that I'm 100% sure.
If you proceed to the point of signing an actual application (form 1003,) you will. You will certify whether the home used as the collateral for the loan will be your residence or an investment property... and you will sign and certify that you will occupy this as your primary residence within 30 days of closing, at risk of committing federal banking fraud.

So you think in general I would want to put the lowest down payment possible?
Yes

My main question is whether you think its best to have a lower down payment and a neutral cash flow (maybe negative with repair costs) or a higher down payment and a positive cash flow (maybe neutral with repair costs)?
It depends... is your non-real estate current cashflows such that you would need to rely on more cashflow from your rental? If so, then in essence you would need to inject more of your immediate liquid capital into the equity (regardless of actual return or yield) in order to have it generate more cashfow.

The post-tax costs of residential loan leverage is at generational lows, and can be made virtually permanent with long fixed rate terms. The safe rates post-tax of return you'll be able to generate on the same dollars will highly likely be much greater than the costs of those dollars outstanding as loans.

In other words, you can borrow at long term rates below 3%, and earn growth at long term rates above 6-8%

How many dollars do you want compounding toward your ultimate financial emancipation at that spread? Whatever you put towards down payment loses that spread as opportunity cost.

Its your call.

Dave Donhoff
Leverage Planner
Print the post Back To Top
No. of Recommendations: 0
I find this thread very interesting since I am going through a similar situation. I am about to buy a property and I do plan to live there, but I travel a lot for work.... so what happens if I need to move to another country for a few months just 3 days after I purchase the property? In my job there is a high probability of that happening. And it would be short-sighted from the lender not to allow me to rent it under those conditions. My goal is to live there, yes, but if I'm out of town, I should not be forced to lose money simply "cuz I just bought it".

Also, how can you get no PMI with only 5% down?? That surely caught my eye. As per my lender, conventional mortgage loans require at least 20% down in order to avoid PMI. Is there a specific type of loan that has this "5% down gets rid of PMI" characteristic? Or is this "20% down or PMI" story the typical lender scam?

By the way, PMI is evidently a scam in itself born out of greed and banks making the rules. Why pay mortgage insurance? If i stop paying the mortgage they get my house, keep my down payment and kill my credit. Isn't that enough?

Moreover, when you talk about the form 1003 where you are required to say that "you intend to move to your new property within 30 days".... well yes I do intend to do so, but with my luck I could get fired or demoted the day after signing that 1003 form and I cant move into the new house even if i have all the best intentions to do so... So what happens then? what are my options? Do I have to stop eating to pay the mortgage, or else risk pulverizing my hard earned credit and be foreclosed?

Finally, do you have to sign something that specifically says that "you cannot rent for a year"? If so, it occurs to me that you could cross out that part and put your initials there (that's how you legally modify a document). I've done that with non-compete and IP agreements in employment contracts which are obviously abusive and outrageous and are illegal in most countries. Not happy with paying miserable salaries that never grow and provide the most unfair employee-exec salary ratio in history, they want to own your ideas as well!!
Print the post Back To Top
No. of Recommendations: 4
I am about to buy a property and I do plan to live there, but I travel a lot for work.... so what happens if I need to move to another country for a few months just 3 days after I purchase the property?

Are you going to rent it out when you are out of the area? If so, that could be an issue. If you are not going to rent it out, then you are probably okay, as there are generally some weasel words in the occupancy clause - but you need to get the occupancy clause that your lender uses.

And it would be short-sighted from the lender not to allow me to rent it under those conditions.

Well, the expectation is that if that's the way your job/life is, that you would buy a house that you could afford to pay for even if you are out of the area, without having to rent it out, since it's *supposed to be* your primary residence. I would say that with your situation, it would be short-sighted of you to buy a house that you can't afford to pay for when you get called out of town unexpectedly.

By the way, PMI is evidently a scam in itself born out of greed and banks making the rules. Why pay mortgage insurance? If i stop paying the mortgage they get my house, keep my down payment and kill my credit. Isn't that enough?

No. Mortgage insurance is to protect the lender. When foreclosing, the lender generally loses at least 20% of the value of the home, between legal costs, carrying costs, possible damage repair and selling costs. Since you are choosing to buy with less than 20% down, the lender is requiring you to buy PMI to protect them against loss. If you had chosen to put 20% down, they would not require it.

Another way that you can avoid PMI is to do 80/10/10 or 80/15/5 financing, if you can find it. You will get a first mortgage for 80%, and then a second mortgage or HELOC for 10% or 15% of the value, and do a downpayment for the rest. The hook? The 2nd mortgage/HELOC is generally at a higher rate, because it's more risky to the lender holding that loan, as they generally recover very little, if anything, in a foreclosure. This type of financing was all the rage during the real estate bubble, but is difficult to find and qualify for now, as lenders are much more risk averse now.

Of course, if you don't like those options, you always have the option to wait until you can put 20% down to avoid PMI or 2nd mortgages/HELOCs.


Moreover, when you talk about the form 1003 where you are required to say that "you intend to move to your new property within 30 days".... well yes I do intend to do so, but with my luck I could get fired or demoted the day after signing that 1003 form and I cant move into the new house even if i have all the best intentions to do so... So what happens then? what are my options? Do I have to stop eating to pay the mortgage, or else risk pulverizing my hard earned credit and be foreclosed?


Well, here's a link to a Form 1003 that you can peruse yourself: https://www.fanniemae.com/content/guide_form/1003rev.pdf It says 'intend' - so I guess the question is, how can you prove your intent?

Finally, do you have to sign something that specifically says that "you cannot rent for a year"?

Different lenders have different occupancy rules, so you would need to get a copy of the forms that they will have you sign at closing. Here's what the occupancy rule on my most recent mortgage (Oct, 2012) said:

6. Occupancy. Borrower shall occupy, establish and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of the occupancy, unless Lender otherwise agrees in writing, which consent shall not be unreasonably withheld, or unless extenuating circumstances exist which are beyond Borrower's control.

So, there is some weasel wording in there, but again, what will be considered an extenuating circumstance beyond your control? Loss of job? Pretty likely. Being asked to leave the area for 3 months when the same thing happened 3 times during the last year? Not so probable.

If so, it occurs to me that you could cross out that part and put your initials there (that's how you legally modify a document).

Then you are unlikely to close on your closing date, as (1) nobody at the closing table is likely to have permission to agree for the lender to the changes you unilaterally want to make; (2) without agreement from the lender, the closing funds won't be released; and (3) the lender is likely to be willing to offer you an investor/2nd home loan at different terms, if you don't want to agree to the occupancy clause.

I've done that with non-compete and IP agreements in employment contracts which are obviously abusive and outrageous and are illegal in most countries.

Again, it still takes agreement by both parties. See above about the lender being willing to make you a loan under different terms, if you don't want to sign the occupancy clause.

While you may think it's 'unreasonable' - it's what you told the lender when you applied for the loan. If you want to change what you told them, they have a right to change the loan they are offering you.

AJ
Print the post Back To Top
No. of Recommendations: 0
AJ, your Occupancy Clause says that you need to occupy it for a year "unless the Lender otherwise agrees in writing". I guess you could request that the Lender does so before signing that.
Print the post Back To Top
No. of Recommendations: 0
AJ, thank you for your reply. What if i do what the good man above says and ask the Lender to be a little humane and agree in writing to waive the occupancy clause because of my specific circumstance? Do you think that is possible? There has to be at least one lender with human empathy out there.

Also the term "extenuating circumstances" is as vague as they come. My sister can probably convince anyone that a broken nail is an extenuating circumstance while I might not be abe to do so even if I get drafted to WWIII.

Finally, I've been thinking, how do they know if I'm renting the house or not?? Do they have an agent checking up on me every once in a while? Or am I also legally obliged to signed some document where I have to tell them what I do with my own property?
Print the post Back To Top
No. of Recommendations: 1
, it occurs to me that you could cross out that part and put your initials there

Won't work. The lenders specifically say that no modifications to the printed contract will be allowed. You take it or leave it --- they won't accept any modifications proposed by you. Period.

"you intend to move to your new property within 30 days".... well yes I do intend to do so, but with my luck I could get fired or demoted the day after signing that 1003 form
Of course. You could also be fired the next day such that you would no longer qualify for the loan.
The key word is "intend". If push comes to shove, you would have to demonstrate to a judge that you truly intended to move in. The court will look into the surrounding circumstances.
Print the post Back To Top
No. of Recommendations: 0
"unless the Lender otherwise agrees in writing".

Which they will not do. You won't even be able to find the name of somebody at the lender who would be authorized to make that agreement.

And anyway, they wouldn't.
Print the post Back To Top
No. of Recommendations: 5
I believe it will all come up when you get insurance for the house anyhow. You need the right type of insurance, and they will look at the loan, and may not issue rental coverage for a house for which the loan is not structured that way.

Rather than figuring out how you can commit fraud & get away with it, you should just get a loan for an investor property. This is what thousands of others do.
Print the post Back To Top
No. of Recommendations: 1
There has to be at least one lender with human empathy out there.

What makes you so special? Lenders operate by inputting information into formulas and listening to what those calculations tell them. You being different makes you a bigger risk to them, not a special case in a good way.

Finally, I've been thinking, how do they know if I'm renting the house or not?? Do they have an agent checking up on me every once in a while? Or am I also legally obliged to signed some document where I have to tell them what I do with my own property?

Because your lender is listed as a lien holder on insurance, they will receive updates regarding any changes. Even when we took back a private note when we sold a house, the insurance co kept us appraised of each and every change the person we sold the house to made. Don't change the insurance from owner occupied to rental and if there is an insurable event, your insurer might not pay out. Further if the lender finds out you did not comply with their requirement, your loan could be called and you could be subject to prosecution for fraud if it was determined that you planned to keep them in the dark.

Don't want to sign the no intent to rent document? No problem. You won't get the loan of course if you don't sign, but that is a choice. On the other hand, if you do not expect to rent the place out, but a job transfer after the purchase makes it necessary to do so, that is certainly an argument that can be made with the bank, with the timetable of the transfer being proof of fraudulent intent or not.

Lenders work the numbers. No empathy is considered.

IP
Print the post Back To Top
No. of Recommendations: 0
Also the term "extenuating circumstances" is as vague as they come. My sister can probably convince anyone that a broken nail is an extenuating circumstance while I might not be abe to do so even if I get drafted to WWIII.
You have to sell it to a judge. A judge who might get annoyed if he thinks some scam artist is trying to yank his chain.

how do they know if I'm renting the house or not?? Do they have an agent checking up on me every once in a while? Or am I also legally obliged to signed some document where I have to tell them what I do with my own property?
Don't overthink it. They don't go out looking for people to nail.
But if you come to their attention somehow, at THAT point they are incented to look closely at what you did.

They don't look at 1000 houses to see if the owner rented it out instead of moved in.
But they can look at everything about ONE person to see if he broke any rules. If 999 people sign the contract as-is, and 1 person wants to change it, guess who they will pick to look at closely?

I have heard that they occasionally audit a batch of new mortgages, just to make sure that everything was done correctly. In those cases, I could well believe that somebody does drive by the houses and checks to see who is living there. If your name is Smith and Mrs. Martinez answers the door and says that she pays her rent to Mr. Smith ..... ;-(
Print the post Back To Top
No. of Recommendations: 1
your Occupancy Clause says that you need to occupy it for a year "unless the Lender otherwise agrees in writing". I guess you could request that the Lender does so before signing that.

And then the lender would probably offer you a loan at an investor rate, rather than approving the request.

You need to understand, these loans are all being packaged up to be sold to Fannie/Freddie, and if changes are made before signing, they don't fit the criteria to sell to Fannie/Freddie. And if they don't sell the loan to Fannie/Freddie, the lender has to hold the loan, and doesn't get their expected money out of it, which means that they don't have money to cover the next guy's loan.

You can try, but I don't think you'd have much luck.

AJ
Print the post Back To Top
No. of Recommendations: 1
What if i do what the good man above says and ask the Lender to be a little humane and agree in writing to waive the occupancy clause because of my specific circumstance? Do you think that is possible? There has to be at least one lender with human empathy out there.

You would need to get a portfolio lender who isn't selling their loans to Fannie/Freddie. It's not empathy, it's the money that they are concerned about.

how do they know if I'm renting the house or not??

What address do you use for things like having mail delivered, registering your car, registering to vote, your income tax returns, etc. if you are renting the house out? An owner that is using an address that isn't the property address can be flag that it's not owner-occupied.

Do they have an agent checking up on me every once in a while?

Servicers sometimes do occupancy checks.

Or am I also legally obliged to signed some document where I have to tell them what I do with my own property?

The document that you signed with the occupancy clause will also have lots of other clauses in there about what you can and can't do, like you agree to pay taxes, that the lender has first dibs on the rents collected if you do rent it out, and don't pay them their payments; that you have to maintain your property, pay the taxes, etc.

If you are concerned about what you are signing up for when you borrow money to pay for a house, you might want to read some of those documents before you actually do borrow the money. They are generally publicly available documents that you can see on your county clerk's website. Look for documents titled 'Deed of Trust' or 'Mortgage'.

AJ
Print the post Back To Top
No. of Recommendations: 2
Hi gol,

but I travel a lot for work.... so what happens if I need to move to another country for a few months just 3 days after I purchase the property?
Same thing as for anyone/everyone else who might have that happen; "Oops! O siht, boss... I *just* closed on a new home here in the area, can the company cover the costs I'm incurring?"

Happens with professional athletes all the time. (Side story; My back-door neighbor last summer was Josh Brown. He paid full list, $1.4M, for one of the nicest homes on our block... then the Jets cut him. He busted arse, got a spot on the Cleveland squad, won the NFL special teams player of the week at the end of the season... and got cut again for a younger player... then finally nailed & got signed a spot on the NY Giants. Cross-country commuting is commonplace for the pros, but he (actually more likely his wife) decided he actually wanted a bigger place for the kids. They listed the place, and sold it in 3 months at a slight uptick.)


In my job there is a high probability of that happening. And it would be short-sighted from the lender not to allow me to rent it under those conditions. My goal is to live there, yes, but if I'm out of town, I should not be forced to lose money simply "cuz I just bought it".
Win, lose, or draw money... that's up to you. The lender's not "forcing" you to do anything but keep your agreement.

Also, how can you get no PMI with only 5% down?? That surely caught my eye. As per my lender, conventional mortgage loans require at least 20% down in order to avoid PMI. Is there a specific type of loan that has this "5% down gets rid of PMI" characteristic? Or is this "20% down or PMI" story the typical lender scam?
Not exactly a "scam" story... simply ignorant.

When we're talking about less than 20% down...
You can get a portfolio loan where the lender self-insures.
You can get a loan with monthly-paid PMI (this is what you've heard about,)
You can get a loan with single-premium MI,
> You can pay that single premium from your own cash at closing,
> You can pay that single premium from seller contribution cash at closing,
> You can pay that single premium from lender rebate at closing,


By the way, PMI is evidently a scam in itself born out of greed and banks making the rules. Why pay mortgage insurance? If i stop paying the mortgage they get my house, keep my down payment and kill my credit. Isn't that enough?
Yes, it *IS* enough... *IF* you have at least 20% equity.
That's the entire point of mortgage insurance... covering the risk to the lender of your default without sufficient equity (after all legal costs & firesale discounts) to recover their principal.

Ray & AJ covered the rest quite well.

Dave Donhoff
Leverage Planner
Print the post Back To Top
No. of Recommendations: 0
Also, how can you get no PMI with only 5% down?? That surely caught my eye.

You can't. There's not a lender on the planet that will offer the same rate for 5% down as they will for 20% down.

There are three ways that PMI can be paid:

1. Borrower paid (upfront as a single premium payment)
2. Lender paid (by raising the interest rate)
3. Borrower paid (an extra fee each month reflected as a separate line item on your monthly mortgage statement)

When a lender says, "no monthly PMI," they're talking about Lender paid PMI (#2 above). What they mean is, "there's no separate PMI payment that appears on your monthly mortgage statement because we built it into the rate."
Print the post Back To Top
No. of Recommendations: 0
What if i do what the good man above says and ask the Lender to be a little humane and agree in writing to waive the occupancy clause because of my specific circumstance? Do you think that is possible?

No. It's not possible to change the verbiage in the documents that Fannie Mae and Freddie Mac provide or to amend them in any way.
Print the post Back To Top
No. of Recommendations: 0
Finally, I've been thinking, how do they know if I'm renting the house or not?

By way of example, CA leads the nation in mortgage fraud. In that category, the most prevalent type of fraud is occupancy fraud.

http://ivn.us/2012/03/09/california-leads-nation-in-suspecte...

Therefore, lenders hire (literally) thousands of inspectors whose sole job is to detect occupancy fraud, and they have numerous ways to detect this.

http://www.whitecollarfirm.com/CM/Custom/Fraudulent-Occupanc...

"Occupancy" is defined as (1) moving into the property within 30 days of loan closing, and (2) consistently occupying the property for one year.

When you submit a loan application, one of the questions in the "Declarations" section (page 4) of the loan app is, "Do you intend to occupy the property as your primary residence?" If at the time you're engaged in the loan process your intention is to occupy, you would answer "yes."

Prior to loan funding, you'll be offered another opportunity to answer this question via the "final 1003." If at that time it's still your intention to occupy the property as your primary residence, you would again answer "yes."

What happens after that isn't within anyone's capacity to predict--not even yours. Therefore, you can rent out the property without being fraudulent; however, you have an obligation, clearly spelled out in the documents, to notify your lender if that event occurs within the first year of your ownership.

Or the applicant could lie when answering the question on page 4 and suffer the consequences, if any, as a result of an occupancy check. If the applicant is seeking an FHA or conforming loan, mortgage fraud is a felony and so not worth trying to not pay the extra 1.5% fee and higher down payment requirement for an investor loan.

When your closing loan documents are placed before you, there will be a document in it that clearly warns you not to commit mortgage fraud. I can't find a copy online but let's just say the font used to create the document is large.

Here's a white paper about mortgage fraud.
http://www.ffiec.gov/exam/Mtg_Fraud_wp_Feb2010.pdf

Here are some people who went to jail for occupancy fraud.
http://mortgagefraudblog.com/broker-sentenced-for-occupancy-...
Print the post Back To Top
No. of Recommendations: 0
Also the term "extenuating circumstances" is as vague as they come.

Actually, there are only three extenuating circumstances and they're clearly defined as:

1. Death of the primary breadwinner
2. Medical emergency
3. Layoff due to reduction in force (not just losing your job or getting fired)

There are no other extenuating circumstances and the three above must be fully documented.
Print the post Back To Top
No. of Recommendations: 0
You would need to get a portfolio lender who isn't selling their loans to Fannie/Freddie.

All lenders, portfolio or not, use Fannie/Freddie constructed lending documents. And they won't change the verbiage, either.
Print the post Back To Top
No. of Recommendations: 1
Gingko100 wrote: Rather than figuring out how you can commit fraud & get away with it, you should just get a loan for an investor property. This is what thousands of others do.

Gingko100, you don't even know me and you are already trying to defame me. I tell you, these people are everywhere! You say that I am "trying to commit fraud and get away with it" when what I am trying to do is PROTECT myself by modifying a legal document BEFORE I sign it so that IN CASE that I am not able to live in the property that I am about to purchase I can legally rent it out. And I have reason to believe this might happen. This is NOT fraud. I am being completely honest with my situation: This is to be my first home, not a rental property but I need to have the ability to rent it out when I’m out of the city for extended periods of time.

I want to be clear: All I want is to have the OPTION of renting my own property at any time after purchasing it. That's it. And I only have ONE (once I purchase it), so I am not trying to disguise an investment as a residential purchase.

You know what's fraud Ginko100? That we bailed out the banks with our tax money! Was that OK to you? Did the bankers that create the crisis go to jail or are they still riding private jets and enjoying the millions they embezzled? Are they gonna bail me out if my job requires me to temporarily move to another state and pay for a new rent plus the mortgage of an empty house that the bank itself don't allow me to rent? No! Oh yea, but that is all just fine, because it all happened according to "the law" and "the rules" that they wrote.

That is the problem with our society nowadays. We are so used to being stepped over by banks that we find it "okay" that they make all the rules to protect themselves from us with their army of lawyers and lobbyist and people checking up occupancy. In the end who cares if they FAIL? We would just bail them out again, right? All back to normal, no problem! On the other hand a low-middle class individual with little money to spare trying to modify a contrat that is inconvinient for his personal situation is seen as "trying to commit fraud". Amazing! I say if they make rules that are convenient for them, we need to push so that the contract is fair for us as well. But sadly this country lost its ability to strike and protest a long time ago.

Everyone else, thank you for your valuable input! As, AJ mentioned, I can try to get a portfolio lender. That sounds like the best option for me. Also, thank you CCinOC for the list of valid "extenuating circumstances" for the lenders.

I think there is a lot of pessimism here on our ability to get rid of the "occupancy" clause in the document. I believe that every document can be legally modified before signing it, just that most people don't take the time to do so and don't believe in their own ability as an individual to confront a bank or a company. Like I said, before signing employment contracts I have modified/crossed-out IP and non-compete agreements, while most people think that doing so would stop the company from hiring you. Like I said, I would understand signing the "occupancy" clause if I had 10 properties, but this one would be my first and only home, so evidently my main intention is to occupy it as soon as possible.
Print the post Back To Top
No. of Recommendations: 9
I want to be clear: All I want is to have the OPTION of renting my own property at any time after purchasing it. That's it.

Well, you have some choices you can make then.....

- You can get an investor's loan, and rent it out from day 1, no issues

- You can get an owner/occupant loan and meet the occupancy requirement your lender imposes, and then you are free to rent it out after that clause is met (Note: if you have to travel on business, but don't rent the property out and are still using the home as your primary residence, you would be fulfilling the terms of the occupancy requirement, as it would still be your 'primary residence' even though you aren't physically there)

- You can get an owner/occupant loan and, if you haven't met the terms of the occupancy requirement when you want to rent it out, request in writing that the lender waive the terms of the occupancy requirement. If they waive the terms, then you are fine to rent it out. If they do not waive the requirement, you won't be able to rent it out until you meet the terms of the occupancy requirement.

And I only have ONE (once I purchase it), so I am not trying to disguise an investment as a residential purchase.

But you don't seem to know what you want this house to be - your primary residence, or a rental property. If you want to be able to rent it out starting on day 1, then it IS an investment property. If you are willing to wait until the terms of the occupancy requirement are met or waived until you rent it out, then you are buying it as an owner/occupant. So which is it? Once you determine that, you can determine which kind of loan you need to get.

Please keep in mind, as Dave said - nobody is forcing you to borrow the money. It's your choice to borrow the money so that you can purchase a house. If you want to borrow the money, you need to be willing to borrow under the terms that are being offered.

That is the problem with our society nowadays. We are so used to being stepped over by banks that we find it "okay" that they make all the rules to protect themselves from us with their army of lawyers and lobbyist and people checking up occupancy. In the end who cares if they FAIL? We would just bail them out again, right? All back to normal, no problem! On the other hand a low-middle class individual with little money to spare trying to modify a contrat that is inconvinient for his personal situation is seen as "trying to commit fraud". Amazing! I say if they make rules that are convenient for them, we need to push so that the contract is fair for us as well. But sadly this country lost its ability to strike and protest a long time ago.

Banks have always been willing to lend money to those who don't need to borrow money. And they usually have pretty good payback rates when they do that, because the borrower didn't actually need to borrow the money.

It's when banks start lending money to those who need to borrow money that they run into trouble, since the likelihood of the bank getting paid back as agreed diminishes as the borrower's 'need' to borrow money (rather than funding it themselves) increases. And that's part of what happened in the most recent financial crisis. If you could fog a mirror (and sometimes if you couldn't), you could probably find a lender who was willing to give you some kind of a 'no-doc' loan. The easy money created an asset bubble, driving housing prices up to levels that couldn't be sustained once the money supply started to tighten.

The current lending environment, where banks are reluctant to lend money to those who need it is the result. Eventually the pendulum will swing back to where money is easier, although I hope it doesn't get to the excessively easy money that occurred during the real estate bubble.

I think there is a lot of pessimism here on our ability to get rid of the "occupancy" clause in the document. I believe that every document can be legally modified before signing it, just that most people don't take the time to do so and don't believe in their own ability as an individual to confront a bank or a company.

You can try all you want, but if you want a 'conforming' loan, you won't get the occupancy clause changed unilaterally. That is because the lender won't be able to sell the loan to Fannie or Freddie if they waive the occupancy clause. If you go to closing and refuse to sign the contract without changing the occupancy clause, the lender will not fund your loan, and you won't close. You can try, but you need to be aware that you risk losing your earnest money if the only reason you don't close is because you wanted to change the occupancy clause.

Any 'non-conforming' loan (investor, portfolio, hard money, jumbo, etc.) is going to either (1) have a higher rate, (2) require a higher down payment, (3) have higher fees or (4) some combination of the other 3 items. This is partly because it's a specialty loan instead of a mass-produced loan, and partly because it's generally a riskier loan from an investor's standpoint.

AJ
Print the post Back To Top
No. of Recommendations: 1
This is to be my first home, not a rental property but I need to have the ability to rent it out when I’m out of the city for extended periods of time.

If you 'need' to rent it out when you aren't occupying it, then it's a rental property. If you want it to be an owner/occupant property, you need to have enough money set aside in reserves to pay the associated bills without having to rent it out for at least the length of the occupancy requirement imposed by your lender, in case you cannot get the occupancy requirement waived.

AJ
Print the post Back To Top
No. of Recommendations: 2
I want to be clear: All I want is to have the OPTION of renting my own property at any time after purchasing it.
Then get an investor loan.

You know what's fraud Ginko100? That we bailed out the banks with our tax money! Was that OK to you? Did the bankers that create the crisis go to jail or are they still riding private jets and enjoying the millions they embezzled?
It's simple - there's no need for ranting. You can get the loan at that structure or not. If not, you create problems for yourself. You seem not to believe this and to think there's some kind of macro reason for you to get an exception.

I believe that every document can be legally modified before signing it, just that most people don't take the time to do so and don't believe in their own ability as an individual to confront a bank or a company.
I negotiate major legal agreements every week as part of my job, so I do this all the time., Sometimes we reach agreement, sometimes we don't. When we don't the legal agreements and execution are delayed. Every time one modifies a clause the other party gets to say yes or no. In your case with what you propose, the banks will say no as this isn't anything they ever consider. You can strike lines, but you will not then successfully close.
Print the post Back To Top
No. of Recommendations: 2
There has to be at least one lender with human empathy out there.

It's business; it's not personal.
Print the post Back To Top
No. of Recommendations: 2
I am trying to do is PROTECT myself by modifying a legal document BEFORE I sign it so that IN CASE that I am not able to live in the property that I am about to purchase I can legally rent it out. And I have reason to believe this might happen.

Then good luck getting a principal residence mortgage without committing fraud. You seem to think that you can alter documents to give yourself sufficient wiggle room AND get the mortgagee to agree to the alterations. Ain't gonna happen.

You can buy something intending to use it as your principal residence and have temporary work absences without renting out the property with no problem regardless of what you've signed. BTW, do you really think short-term rentals are a good idea? Or are you planning to use your first "away" work assignment as an excuse to lease the property? Which reminds me, what kind of employer makes people travel without paying travel expenses? You might be able to negotiate better employment terms given your self-described experience at altering employment contracts. Maybe the problem is that you need a different job. After all, if your travel expenses are paid you wouldn't have to get extra cash from renting your principal residence.

You can gripe all you like about Ginko's inference, but be assured there's at least one other Fool who comes to the same conclusion. Your story doesn't pass the smell test.

Phil
Rule Your Retirement Home Fool
Print the post Back To Top
No. of Recommendations: 0
Rather than figuring out how you can commit fraud & get away with it, you should just get a loan for an investor property. This is what thousands of others do.

I didn't perceive gol6090 as trying to determine how to commit fraud. I read his posts as trying to figure out how NOT to commit fraud.
Print the post Back To Top
No. of Recommendations: 0
I believe that every document can be legally modified before signing it, just that most people don't take the time to do so and don't believe in their own ability as an individual to confront a bank or a company.

I once tried to do this on behalf of a borrower who was a lawyer and just didn't think a certain provision was helpful to him. I spent hours and hours trying to reach someone at Fannie Mae who would even discuss the issue.

Please save yourself the effort. The loan documents that millions of Americans sign every day are poured over by attorneys who work for Fannie Mae so as to be uniform. They're not going to modify any of them for one lone borrower. They're just not.

http://www.freddiemac.com/uniform/unifsecurity.html
Print the post Back To Top
No. of Recommendations: 1
TMFPMarti wrote: "You seem to think that you can alter documents to give yourself sufficient wiggle room AND get the mortgagee to agree to the alterations."

You present this as if it was an evil thing on my part to try to take advantage of "super-fair" loan documents "that everyone else sings". I am trying to alter the document so that it covers my needs. Just as some users have made an excellent case by saying that the lender is not forcing me to borrow or to sign their documents, which are tailored to benefit them and protect them, well the same applies the other way around. Right? If I alter the document to benefit me, it is not a fraud, it is not illegal, and they are not forced to sign it either. They have all the right to decline my modifications and deny me a loan.

TMFPMarti wrote: "[...]are you planning to use your first "away" work assignment as an excuse to lease the property? Which reminds me, what kind of employer makes people travel without paying travel expenses? You might be able to negotiate better employment terms given your self-described experience at altering employment contracts. Maybe the problem is that you need a different job."

I don't know who you think you are to insult me by openly insinuating that I am being dishonest. This is what I say about our society submissively embracing the terms banks impose on us with their army of lawyers and lobbyists, to the point that a person that tries to modify a legal contract before signing it, so that the terms also match his needs, is perceived as dishonest and fraud. On the other hand they celebrate the fact that we bailed out the banks with our tax money!!! Well Mr. Marti let me inform you that if I have altered contracts before, the people at the other end have accepted my alterations, so that is not either dishonest or fraudulent. If you do not like my alterations, or if you happily accept conditions that banks and companies impose on you, that is not my problem.

Regarding my employer, you are NO ONE to tell me that "maybe the problem is that I need a different job". That is evidently a nasty comment. My employer pays for my relocation and travel expenses, what they don't pay are my rent expenses while I am abroad for periods longer than 1 month, just as I doubt your employer pays your rent or mortgage if they require you to relocate.

What you are obviously failing to grasp is that I do want to purchase a property to be my first home. That is my intent. I invite you to find ONE posts where I say otherwise. What I am not sure is if in less than one year I will be required to relocate for a few months. Temporary relocation is a possibility in my line of work and that would leave me paying rent+mortgage. Therefore, I want the loan contract to allow me to rent the house if that happens. This is not a fraudulent thought. If I sign a document saying that I cant rent for a year and I rent it two months later, THAT is fraud. Altering a document to allow me to rent is not fraud. The borrower has the choice not to sign it, right?

TMFPMarti wrote: "Your story doesn't pass the smell test."

Your comment stinks. I did not engage into personal attacks and did not expect to receive any. Well I guess that's what happens when you "mess with banks" by not accepting their "super-fair" terms submissively.

In any case, I demand RESPECT. I have two people calling me fraud and dishonest. I have not questioned the moral integrity of anyone, and it outrageous to have mine gratuitously questioned.

CCinOC wrote: I didn't perceive gol6090 as trying to determine how to commit fraud. I read his posts as trying to figure out how NOT to commit fraud.

PRECISELY!! Trying to alter a document before anyone signs it cannot be considered fraud by anyone with a free mind.

You tell me that I won't be able to make them sign my altered document, well maybe that will be the case and then there will be no deal. That's it! Please follow CCinoC's example, there is no need to start calling names and disrespecting anyone folks.
Print the post Back To Top
No. of Recommendations: 8
What you are obviously failing to grasp is that I do want to purchase a property to be my first home. That is my intent. <snip>

Temporary relocation is a possibility in my line of work and that would leave me paying rent+mortgage

Buy the house as a primary residence and take out the owner occupied loan with the better terms and smaller down payment. From the loan's perspective you're allowed to rent out a bedroom or a part of the home, say the basement, and still retain primary home status. If you are overseas for three months, you'll have a tenanat in the home who will serve to both watch over the home and contribute to the mortgage payment.

Or don't, and continue to make every molehill a mountain and rally against how society is being oppressed.
Print the post Back To Top
No. of Recommendations: 1
You tell me that I won't be able to make them sign my altered document, well maybe that will be the case and then there will be no deal. That's it

I can't help but wonder what the sellers approach will be towards your earnest money if your funding falls through on a conventional mortgage because you refuse to sign documents stating that you won't rent it out. If I were the seller I would look at keeping the earnest money. Your loan contingency should state what sort of loan you are applying for. If you agree that this purchase contract is dependent on getting a conventional loan, but then you don't follow convention and it falls through, that opens up a whole new can of worms.

IP
Print the post Back To Top
No. of Recommendations: 2
You present this as if it was an evil thing on my part to try to take advantage of "super-fair" loan documents "that everyone else sings". I am trying to alter the document so that it covers my needs.

I don't think anyone has implied that trying to alter it is evil.
However I think there is an overwhelming agreement that the idea that you can successfully strike that clause from the contract AND get the bank/lender to agree to it is naive. (And it's understandable you're not aware of this being one of those cases where things are not negotiable since it is your first home)

BTW - you compare it to striking out noncompete agreements in employment contracts... Those usually are very negotiable. And in some cases unenforceable anyhow. Also there is no secondary market for your employment contract - so it's quite a different beast.
A closer example would be if you tried to apply for a credit card, and crossed out some terms in their application. Almost certainly they would reject your application (or not even accept it)

just as I doubt your employer pays your rent or mortgage if they require you to relocate.
For myself -
For a temporary assignment (ex. less than 1 year), they absolutely pay my rent/hotel.
For a longer assignment, they pay for relocation - they pay the movers to move my crap, they pay the RE agents to sell my house. I think they even pay for a house-hunting/apartment hunting trip (airfare + hotel), as well as other misc. expenses.
Personally, if they didn't do that, and wanted to relocate me, I *would* be looking for a new employer. (why should I pay for those expenses out of my salary just for my employer's benefit? )
Print the post Back To Top
No. of Recommendations: 0
In Paradise, that is an interesting question. The contract with the seller says that if I cant get a loan, I get the money back from my escrow account. I guess I will find out.

And to the person with the funny comment about me talking about our society being oppressed, well I dont feel guilty of fighting for my rights. I know our society has shifted in a way that anyone complaining about anything is seen as a troublemaker, but usually the people that fight for their rights are the ones that make things change. I still fail to see anyone comment on our tax money bailing out banks. You see? Banks taking advantage of us is all fair game to most. The worst part of it is that you have been induced to think that that is fair game. And if anyone complains about it they are "making mountains out of molehills"
Print the post Back To Top
No. of Recommendations: 2
I still fail to see anyone comment on our tax money bailing out banks.
Because it is irrelevant to the subject of this thread.

If pursued as a topic it will just degenerate into political yammering. There are plenty of other boards for that stuff.
Print the post Back To Top
No. of Recommendations: 1
I didn't perceive gol6090 as trying to determine how to commit fraud. I read his posts as trying to figure out how NOT to commit fraud.

Me too.

The answer is declare the property an investment property and get the appropriate loan. If he/she doesn't end up renting, refinance into an owner occupied loan.

It's actually pretty simple.
Print the post Back To Top
No. of Recommendations: 3
Buy the house as a primary residence and take out the owner occupied loan with the better terms and smaller down payment. From the loan's perspective you're allowed to rent out a bedroom or a part of the home, say the basement, and still retain primary home status. If you are overseas for three months, you'll have a tenanat in the home who will serve to both watch over the home and contribute to the mortgage payment.


In all honesty, this is what I'd do because I know with absolute certainty that the loan docs will not be modified for the hybrid situation.

But I'd also go in with the knowledge that if it blew up on me and ended up costing me more because of my choice it was because of the choice I made, not some nonsense about evil Banks.
Print the post Back To Top
No. of Recommendations: 1
I know our society has shifted in a way that anyone complaining about anything is seen as a troublemaker, but usually the people that fight for their rights are the ones that make things change. I still fail to see anyone comment on our tax money bailing out banks. You see? Banks taking advantage of us is all fair game to most. The worst part of it is that you have been induced to think that that is fair game. And if anyone complains about it they are "making mountains out of molehills"


No one is commenting on it because it's completely irrelevant to this situation.

Your personal situation and the non negotiation of closing docs have nothing to do with one another. One is your issue, the other has to do with the mortgage capital markets, not some ridiculous David vs. Goliath crap.
Print the post Back To Top
No. of Recommendations: 0
I still fail to see anyone comment on our tax money bailing out banks.
Because it is irrelevant to the subject of this thread.


Greeked!
Print the post Back To Top
No. of Recommendations: 0
I still fail to see anyone comment on our tax money bailing out banks. You see? Banks taking advantage of us is all fair game to most.

Fortunately or unfortunately, depending on how you look at it, this age-old bromide still applies: "He who has the gold makes the rules." It has always been this way.
Print the post Back To Top
No. of Recommendations: 0
"He who has the gold makes the rules."

Have to laugh--this is something we keep trying to explain to our daughter. She thinks that when she turns 18 (in less than a year) she can do what she wants. We've agreed, but reminded her that, likewise, we have no obligations to her after that point--she can abide by our rules or move out, finish high school, and pay for college herself.

Continue to be amazed that we even have to have this conversation--never really had it with our son, yet he's always complied.

Kathleen
Print the post Back To Top
No. of Recommendations: 0
It had nothing to do with the topic? But my personal life, my job, and my "being dishonest from trying to change a document before signing it" is surely 100% on the spot, eh champ?
Print the post Back To Top
No. of Recommendations: 1
gol6090, just ignore the pilers-on. They love to do that. It's who they be.
Print the post Back To Top
No. of Recommendations: 1
Well this topic has gone a long way since my initial post on whether a 10% or 20% down payment was more convenient!

gol6090 is not trying to do do anything illegal. He is not trying to break the rules of the game, he is trying to change them to his convenience. Lenders make these rules to their convenience after all so its all fair game before the documents are signed. This is no fraud.

I would really like to know the outcome to gol6090's situation. Even if we think he has a snowball's chance in hell of achieving his objective, I think the attacks on his integrity and the smear remarks on his social views are uncalled for.
Print the post Back To Top
No. of Recommendations: 0
CCinOC quoted: "he who has the gold make the rules". Well yes, but also regular citizens are the ones who keep banks going. Without our money, they have nothing. We have much more power than most people realize, but we were molded into an individualistic society so we are easy to control. Sadly, it worked (it was not always like that!).

FloridaInvestor1, i will let you know how it goes!
Print the post Back To Top
No. of Recommendations: 0
CCinOC, I guess in my specific example it might end up working that way though
Print the post Back To Top
No. of Recommendations: 0
gol6090, its true about that but in our case, the lenders have the money and we need to borrow and no one is going to fight for our cause. I guess it will be a matter of reworking my plan
Print the post Back To Top
No. of Recommendations: 1
And to the person with the funny comment about me talking about our society being oppressed, well I dont feel guilty of fighting for my rights. I know our society has shifted in a way that anyone complaining about anything is seen as a troublemaker, but usually the people that fight for their rights are the ones that make things change. I still fail to see anyone comment on our tax money bailing out banks. You see? Banks taking advantage of us is all fair game to most.

We do our best to stay away from politics on this board. There are many other boards for that on TMF.

IP
not wanting to political noise to overwhelm the beneficial content
Print the post Back To Top
No. of Recommendations: 6
gol6090, just ignore the pilers-on. They love to do that. It's who they be.

Keeps smashing the irony meters.
Print the post Back To Top
No. of Recommendations: 7
I demand RESPECT.

I will not be BALKED.
Print the post Back To Top
No. of Recommendations: 6
I am trying to alter the document so that it covers my needs.
You can't. Several people have told you this in several different ways. No standard lender will change their standard loan contract. (Standard lender: lender who doesn't check your credit report by looking to see if your kneecaps have ever been broken.)

You don't want to accept this. That's your problem, not ours.

I don't know who you think you are to insult me by openly insinuating that I am being dishonest.
It's because the way you are acting is pretty much the same way that people who are looking to commit loan fraud act. If you don't want people to suspect that you are trying to weasel around the owner-occupied requirement, don't act like people who are trying to weasel around the owner-occupied requirement act.

Your rants about bank bailouts just add suspicion that you will have no compunction about ignoring clauses in the contract.

TMFPMarti wrote: "Your story doesn't pass the smell test."

Your comment stinks. I did not engage into personal attacks and did not expect to receive any.

Um, he did not make any sort of personal attack. He merely said that your story doesn't pass the smell test. Which it doesn't.

You are in for some big surprises, too, if you persist. All told, the people responding here have bought and sold dozens of houses and gotten on probably tens of dozens of mortgages. You -- who has never bought a house or ever gotten a mortgage -- think you know more about the topic than anybody else here.

Personally, I've seen the "closer instructions" on my last few refi's. They've all told the closer, "No modifications or marks are allowed on the note or mortgage documents. If anything is added or struck out, DO NOT PROCEED. Return the documents and the loan is not to be closed." They don't even allow you to stike out something that you added. They insist on clean documents that are EXACTLY what they prepared.

I've also personally been in a closing (not mine!) where 90% of the way through, the buyer made a comment to his wife and the agent for the title insurance company said, "Stop. We are not going to issue the title policy. I suspect that there is something not above-board about this sale, so we are not going to close." And they didn't.

CCinOC wrote: I didn't perceive gol6090 as trying to determine how to commit fraud. I read his posts as trying to figure out how NOT to commit fraud.

PRECISELY!! Trying to alter a document before anyone signs it cannot be considered fraud by anyone with a free mind.


Heh. The problem is, when somebody starts asking detailed questions about the extent of a clause, it makes people suspect that they are trying to figure out how far they can push it.
Your original question was innocuous. CC's comment was on point there. But instead of you saying, "Oh, now I understand." you kept pushing and pushing, and then started rants about bank bailouts and bankers not going to jail, and asking "Ok, so I can't do THIS, but how about if I do THAT, and do they send inspectors around to verify that I actually live in the house."
You may be as clean as the driven snow, but that's just the type of questions that somebody who was considering fraud would ask.

And, since you've been told innumerable times, by experienced and knowledgable people that you CANNOT alter the loan documents and that the lenders will NOT agree to any alteration -- why are you still pushing that?

But it doesn't matter what any of us say -- we are not lenders. Call up a couple of lenders and ask them. But a word of advice -- don't keep asking them the questions you asked here after you get an answer you don't like. If you do, you'll make them suspect that you are planning to pull a fast one over on them -- and they will refuse to do business with you.
Print the post Back To Top
No. of Recommendations: 0
I demand RESPECT.

I will not be BALKED.


I just came up with a new rule.

We all know the rule about "don't feed the troll."
My new rule is "don't mock the naif."

Or CC.
Print the post Back To Top
No. of Recommendations: 0
I guess in my specific example it might end up working that way though

The practical reality is that you don't know what the future holds. No one does, so if your intent at the time you purchase the property is to personally occupy it, answer "yes" to that question on the loan application.

If at some time within the next 12 months, you need to rent it out, go ahead and rent it out. If the lender does an occupancy check, you can tell them, "My plans changed; what do I owe you?" They may settle for you sending them 1.5%, which would be the discount point (fee) for an investor loan.
Print the post Back To Top
No. of Recommendations: 0
Rayvt, like I've repeated several times. What I wanted to do was cross out the occupancy clause or avoid it before signing. I've modified documents before that many people would swear on their lives cannot be modified. Looks naive to you? Ok I get that, no problem. Chances are I wont get it my way? Understood. Will I still try? Yes. Nothing illegal here, no fraud. Just wanted to know.

What I asked about how do they know what I'm doing with my property is because I've been living rented for a while and I've never seen anyone doing an occupancy check. I was reading this thread and i found it surprising that they had a clause like that and I was curious as to how they planned to enforce it. If you want to know how CSI works, it doesn't mean you are planning a murder.

Obviously i don't know anything about mortgages or purchasing a house so I don't know how that works and I wanted to know. I also made several other questions as I want to know how the full process work. I had many more questions in mind but probably if I ask about how insurance pays in case of a natural disaster I will be accused of wanting to flood my own house to take advantage of the poor insurance companies.

I see irony runs high in this place. There is no respect. In one thread I've been called ignorant, naive, a fraud, dishonorable, and I have been mocked to death and even told "to change jobs" just for trying to find out how to change a contract before signing it and asking specific questions out of curiosity. Even someone made fun of me for demanding respect. Good job man. You really add a lot to the community.

Have fun mocking the newbies. I am sure you are all geniuses. Just keep in mind that when it happens to you, you had it coming.
Print the post Back To Top
No. of Recommendations: 1
Rayvt, like I've repeated several times. What I wanted to do was cross out the occupancy clause or avoid it before signing. I've modified documents before that many people would swear on their lives cannot be modified. Looks naive to you? Ok I get that, no problem. Chances are I wont get it my way? Understood. Will I still try? Yes. Nothing illegal here, no fraud. Just wanted to know.

You have two mortgage brokers here who have brokered hundreds, maybe thousands of mortgages, telling you that it can't be modified.
Print the post Back To Top
No. of Recommendations: 1
What I asked about how do they know what I'm doing with my property is because I've been living rented for a while and I've never seen anyone doing an occupancy check.

You may not "see" them do anything. For example, a tenant would want to put all utilities (besides possibly water) in his name, but that's a dead give-away that YOU don't live there. There are other ways than physically ringing your door bell to see who answers.

As to why you haven't seen anyone occupancy check the unit you live in--how long as your landlord owned the unit you live in?

http://www.scotsmanguide.com/default.asp?ID=2977&part=1
Print the post Back To Top
No. of Recommendations: 0
Should be: how long HAS your landlord owned the unit you live in?
Print the post Back To Top
No. of Recommendations: 0
Should be: how long HAS your landlord owned the unit you live in?

And I would add "and how do you know that they have a standard owner-occupied mortgage, and not a mortgage for an investment property?"

If the answer is >1 year for the first, or "I don't know" for the 2nd, then there may not be a reason for the lender to do an occupancy check.
Print the post Back To Top
No. of Recommendations: 3
I've modified documents before that many people would swear on their lives cannot be modified.
And your point is what?
That there are many people who will "swear on their lives" when they really have no clue what they're talking about?
I don't think you'll get much disagreement on that.

I assume you were intending to imply that you believe that will be the case here?
I'm sure it won't, as there are valid reasons why that contract doesn't get modified at the closing, and they've been laid out here already.
If you want to piss off your loan broker and the RE agents, go ahead and try to strike it out at the closing. Almost certainly the loan won't close. (I imagine there's a 1 in a million chance you'll get an inept closing agent that won't notice your striking things out)

If you want to piss them off a little less, ask for the loan documents in advance to have them reviewed by a lawyer, and send the docs back with the modifications. Then at least when it comes to closing they'll know that it won't close and won't be as disappointed.

Personally, if I were you, I'd check with my manager - see if there's any plans for me to be relocated within the next year. If not, IMO there is no reason not to sign them as-is. If there is, then I wouldn't want to buy a house.

even told "to change jobs" just for trying to find out how to change a contract
No - you got many of those responses because of other parts of your posts.
For example you stated that you might have to relocate, and the company wouldn't pay for your relocation. (I think you may have even said you have done it in the past where you've relocated and the company didn't pay for it) IMO that's absolute crap behavior for a company, and for me would be a reason to look for a new job/employer.

ignorant, naive
I called you naive - and IMO you are on this subject. Just like I'm naive when it comes to doing work on small engines. There's nothing wrong with having a lack of knowledge (ie. being naive) and asking questions. OTOH, asking questions like "how do they know if I'm renting the house or not??" makes you look like you are planning on lying (ie. fraud). You say you aren't - but I would hope you see how that question would lead people to believe that you're planning to.
Print the post Back To Top
No. of Recommendations: 0
I've also personally been in a closing (not mine!) where 90% of the way through, the buyer made a comment to his wife and the agent for the title insurance company said, "Stop. We are not going to issue the title policy. I suspect that there is something not above-board about this sale, so we are not going to close." And they didn't.

Ray, can you tell me what they said? Curious to know what would cause a red flag to be raised on a sale.

IP
not even able to imagine it
Print the post Back To Top
No. of Recommendations: 7
Rayvt, like I've repeated several times. What I wanted to do was cross out the occupancy clause or avoid it before signing.

Which is the same thing as saying you want an investor mortgage for the price of the cheaper primary residence mortgage. If you need the extra flexibility an investor mortgage provides, pay for it. The banks won't give you it for free.

Good luck. For your sake I hope you listen to the decades of experience on this board, but as I tell my teens, as much as we would like you to benefit from our mistakes and avoid repeating them, it is more likely that you won't learn until you screw up yourself.

IP
Print the post Back To Top
No. of Recommendations: 0
Not Ray VT, yet do have an example of a title attorney impacting a sale.

It was 2004 or '05, during the rush of home sales. Worked with a buyer referred by a RE agent. Took the loan app, ran credit, and collected income & asset statements, (yes, full doc in a time of no doc loans). The buyer had excellent credit, high 700's, over 10 trade lines, dating 15 years back for a 35 year old man.

Buyer got to settlement 15 minutes early and was chatting with the settlement attorney before the closing. Five minutes into the actual closing the buyer called me from the table. The attorney told him he would be committing mortgage fraud if he signed the docs. The application listed him as a US citizen and he was a permanent resident alien.

Truthfully, I had never asked. The app was taken over the phone. His employment history, the seasoning of his credit, our discussion of college, I just checked the box for US citizen. We still closed that day, but I had to have new docs drawn.
Print the post Back To Top
No. of Recommendations: 0
probably if I ask about how insurance pays in case of a natural disaster I will be accused of wanting to flood my own house to take advantage of the poor insurance companies[...]I am sure you are all geniuses. Just keep in mind that when it happens to you, you had it coming.
You are overly sensitive and over-reacting.

We have told you that what you envision occurring will not be feasible. We have told you there is risk to figuring out how to work around agreements - either risk to closing or risk to financing. We have repeatedly told you that as a new home buyer you don't understand the implications of what it is you insist is possible to do.

I think people's frustration stem from the fact that you keep reformulating the same question in multiple ways although it has been answered very thoroughly multiple times by people who are industry experts. And you take rejection of your proposal as a personal affront.
Print the post Back To Top
No. of Recommendations: 0
You have two mortgage brokers here

Two brokers and what Dave calls with affection, a "retail rep".

who have brokered hundreds, maybe thousands of mortgages,

Have not counted but I think I'm nearing number 1,000. Time to get out of this business. But working for a TBTF bank has its perks. Thirty hour work week (9-3), unlimited expense account, huge taxpayer funded bonus at the end of the year, profit sharing, stock purchase program, and the public's love & respect when I say I'm a mortgage banker.

telling you that it can't be modified.

True dat.
Print the post Back To Top
No. of Recommendations: 0
I had many more questions in mind but probably if I ask about how insurance pays in case of a natural disaster I will be accused of wanting to flood my own house to take advantage of the poor insurance companies.

Is it such a problem to read a policy ? But will it be a homeowner's policy or a landlord policy ? And then your tenant's belongings are covered how ?

Just keep in mind that when it happens to you, you had it coming.

Karma does work in interesting ways.
Print the post Back To Top
No. of Recommendations: 0
Ray, can you tell me what they said? Curious to know what would cause a red flag to be raised on a sale.

It was a long time ago so I don't remember the details. IIRC, the husband said something about "when do we give the check to him?" to the wife. The buyer was white and the house was in a solidly black part of Chicago.
Print the post Back To Top
No. of Recommendations: 3
My employer pays for my relocation and travel expenses, what they don't pay are my rent expenses while I am abroad for periods longer than 1 month, just as I doubt your employer pays your rent or mortgage if they require you to relocate.

If you don't have enough in reserves to pay the costs of your primary residence while you are temporarily relocated, without having to try to rent out you home long distance for a short term, you are not ready to buy a house as your primary residence.

AJ
Print the post Back To Top
No. of Recommendations: 0
gol6090, they won't give up until you slink quietly away. It's who they be.
Print the post Back To Top
No. of Recommendations: 0
It had nothing to do with the topic? But my personal life, my job, and my "being dishonest from trying to change a document before signing it" is surely 100% on the spot, eh champ?


In my posts on this thread I never speculated in any way about your personal life or your job nor did I ever imply that you were dishonest.

Try to pay attention.
Print the post Back To Top
No. of Recommendations: 2
gol6090, just ignore the pilers-on. They love to do that. It's who they be.

Reading comprehension: it's what would make these boards boring.
Print the post Back To Top
No. of Recommendations: 1
I guess no one has noticed that gol6090 has made exactly 16 posts in total to these boards, the majority of which have been spent DEFENDING himself!

For cryin' out loud, buzz off the guy!
Print the post Back To Top
No. of Recommendations: 1
I guess no one has noticed that gol6090 has made exactly 16 posts in total to these boards, the majority of which have been spent DEFENDING himself!


Since you're neither talking about me or to me, don't place your reply on my post.

And for context and clarity, gol6090 is taking on an entire board when his beef is with a few specific posters.
Print the post Back To Top
No. of Recommendations: 0
Since you're neither talking about me or to me, don't place your reply on my post.

How does one "place a reply" on a specific post? How is this possible?
Print the post Back To Top
No. of Recommendations: 8
How does one "place a reply" on a specific post? How is this possible?


One clicks on "post reply" from the post to which one wishes to reply.

Not only is it possible, the site is designed that way.
Print the post Back To Top
No. of Recommendations: 0
One clicks on "post reply" from the post to which one wishes to reply.

No, you can click on any post in the thread and the reply will chronologically be the next one in the thread. You're mistaken that I was responding to your specific post.
Print the post Back To Top
No. of Recommendations: 5
The reply will be chronologically next - however you will note that if you click on the subject (in this case "question: down payment on my first home"), that it brings you to your post, #15364.
That's the way this board/website is designed - so that you can easily tell what post someone is replying to. (for example, in this case, this is a response to 15364)
Print the post Back To Top
No. of Recommendations: 1
No, you can click on any post in the thread and the reply will chronologically be the next one in the thread. You're mistaken that I was responding to your specific post.

You can see the post that was responded to by clicking on the subject line, and you will be taken to the post that the responder clicked reply to. TMF tracks it in this way so that one can get context for the reply, and also so that the person whose post was replied to can be notified that they have a reply to their post. Your reply goes to the end of the thread at the time of posting, not right below the one replied to.

Well, my reply was strangely wordy, so I hope you understand it. Click on the subject line and you will see it goes to your post, rather than the last in this thread at this time.

IP
Print the post Back To Top
No. of Recommendations: 1
The reply will be chronologically next - however you will note that if you click on the subject (in this case "question: down payment on my first home"), that it brings you to your post, #15364.
That's the way this board/website is designed - so that you can easily tell what post someone is replying to. (for example, in this case, this is a response to 15364)


Yes, I understand this, but my response was generic. There's no way I could have responded at all without clicking "reply" to SOME post, so I clicked on the last post. It appears that the responding poster thinks the world revolves around him when, in fact, I wasn't responding to him specifically.
Print the post Back To Top
No. of Recommendations: 9
Yes, I understand this, but my response was generic. There's no way I could have responded at all without clicking "reply" to SOME post, so I clicked on the last post. It appears that the responding poster thinks the world revolves around him when, in fact, I wasn't responding to him specifically.

Then you should state it as generic, and not in reply to this specific poster. Otherwise, that is the convention. It's fine not to be conventional, but without explanation be prepared to be misunderstood. At least that is not a novelty for you.

IP,
hoping we have beaten this horse quite dead enough
Print the post Back To Top
No. of Recommendations: 0
At least that is not a novelty for you.

Was this necessary? I mean, really.

I addressed a general piling on; in this case, the second poster who asked the question under discussion had barely even posted on TMF previously. What a Welcome Wagon he met here! Now he's gone, of course, and probably won't ever come back. I don't blame him.

The first poster said, "This is my first home purchase." Didn't help! He got piled on, too, until Poster #2 showed up to offer relief--except he didn't get any himself.

If one wishes to be such a participant, that's fine by me, but I can complain about it, too, and of course, FA when I think appropriate, which I do in this case.
Print the post Back To Top
No. of Recommendations: 7
Yes, I understand this, but my response was generic. There's no way I could have responded at all without clicking "reply" to SOME post, so I clicked on the last post.


It was pointless too, but I don't see anyone holding that against you.


It appears that the responding poster thinks the world revolves around him when, in fact, I wasn't responding to him specifically.

If this is your dysfunctional way of apologizing for your mistake which you then compounded with ignorance and obstinance, I accept!
Print the post Back To Top
No. of Recommendations: 0
Aren't you done yet? You're still beating this dead horse two days later?
Print the post Back To Top
No. of Recommendations: 0
I think, it is always good to purchase a house with down payment at one time. But, at many times, we go for installments. A down payment of 20% at first time and then monthly installments at reasonable rate lessens the burden.
Print the post Back To Top
No. of Recommendations: 0
Hi Muhammad,
A down payment of 20% at first time and then monthly installments at reasonable rate lessens the burden.

What's a reasonable rate in your opinion, Muhammad? How do you determine that?

Dave
Print the post Back To Top
No. of Recommendations: 0
I have heard that they occasionally audit a batch of new mortgages, just to make sure that everything was done correctly. In those cases, I could well believe that somebody does drive by the houses and checks to see who is living there. If your name is Smith and Mrs. Martinez answers the door and says that she pays her rent to Mr. Smith ..... ;-

There are easier ways.

Carrying homeowner policy is required. Mortgage companies receive notification that a Homeowner's policy is currently in force, and notification if it is terminated. The mortgage holder would know if the policy is a homeowner or landlord policy.

For areas that have a homeowner exemption, that information is public record.
Print the post Back To Top
No. of Recommendations: 0
Carrying homeowner policy is required. Mortgage companies receive notification that a Homeowner's policy is currently in force, and notification if it is terminated. The mortgage holder would know if the policy is a homeowner or landlord policy.

OK... not to encourage anything nefarious, but... this is *easily* worked around;
An occupant owner who wants to convert to a rental, without alerting the servicer/lender by changing the hazard insurance coverage, can simply leave the owner-occupant coverage in place, and buy a separate landlord policy (perhaps even from a different insurer, to make sure there are no internal reporting screwups accidentally alerting the servicer/lender.)

This isn't a secret workaround... and the costs are not at all prohibitive (they are a fraction of the premium charged for investor rates,) which is why servicers still do curb-view driveby inspections, and use other occupany audit methods.

Cheers,
Dave
Print the post Back To Top
No. of Recommendations: 0
This isn't a secret workaround... and the costs are not at all prohibitive (they are a fraction of the premium charged for investor rates,) which is why servicers still do curb-view driveby inspections, and use other occupany audit methods.

Cheers,
Dave


How much of a difference is there in interest rates?

Many years ago, we tried to refinance a rental property. We ran into a couple of problems. The major one was the loan wasn't large enough to justify the costs associated a new mortgage. I don't remember what interest rate we were offered.
Print the post Back To Top
No. of Recommendations: 0
How much of a difference is there in interest rates?

On a purchase, its 1/4 to 1/2 to the rate on the principal, PLUS the carry costs of the additional 25% cash required for the higher amount of down payment. That cash carry cost may be 6-20%, depending on the alternatives its drawn from, which can raise the non-owner financing costs up an additional 1.5-3% on top of the 1/4 to 1/2 face premium.

1.75% - 3.5% higher carry costs on investor financing, versus owner-occupant financing, is sufficient incentive for some to seek workarounds.

Dave Donhoff
Leverage Planner
Print the post Back To Top
No. of Recommendations: 1
Aren't you done yet? You're still beating this dead horse two days later?


I already told you I accepted your apology, try to move on!
Print the post Back To Top
No. of Recommendations: 0
I already told you I accepted your apology, try to move on!

Oh, so sorry. I often don't read snark-filled posts all the way through. I "move on" long before that.
Print the post Back To Top
Advertisement