Primary Residence When Not Really A PR
Hi. My friend & I are purchasing a fixer upper and neither of us intend to live in it. We plan on flipping in 6 months. For the sake of ease (I'm stated income, have high DTI ratio & just purchased my own SFR), he is the one getting the loan solely in his name (we will split everything 50/50 amongst ourselves privately). We are trying for 100% financing because we'd like to use our savings to pay for the repairs (otherwise we'd have no money to fix and then what's the point?) He currently rents an apt. 2 hours away and plans on staying put. We have spoken to 3 loan officers and they each tell us we should claim it's his primary residence (even after we told them the above). Since he doesn't own another house, this will work, they say, and then there will be no problem getting the 100% financing due to his excellent credit and full docs. My question is, I know it's not legal (is it?), but since 3 separate officers have told us this, we're wondering if it's that big of a deal to lie??? Sounds like they do this all the time! Does anyone actually come & check? The loan officers told us that since we are planning to pay capital gains tax when we sell in 6 mo's anyway, it doesn't matter how we claim it... Primary or 2nd home. But we're wondering if they are just saying that so they can get their commission. Because in the end, if it IS a big deal, we will be the ones paying for it! Please help! We are in escrow now and running out of time. Thanks so much!
Well, I supose his 'intent' could be to occupy it. He could chose not to occupy it until it is fixed up. In the end (after it is fixed), he could decide not to live there and sell it instead.
I don't see any problem with it since he does not own a primary residence elsewhere.
Anyone else?
If the intention is to live there & "something" happens to change that, you're fine if you sell after 6 mos (this actually happened to me). The bottom line is payment. As long as the mortgage co is paid on time, nobody cares.
If you're leary about the situation, your mortgage broker should be looking for an "A paper", investor friendly lender so you can continue to go back to them for financing.
Sounds like the mtg brokers are so eager for business they'll happiily risk your friend's neck on the deal.
To protect himself, I'd advise him to deliver a signed and witnessed letter to the mtg broker telling him/her that the SFR is NOT presently his residence, but he intends to make it so when it's finished...this way he can prove he did tell the mtg broker about it, truthfully, and that mtg broker chose to proceed knowing the full facts.
THANK YOU ALL! I truly appreciate your input!