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Change from Primary to Investment property for a newly constructed home

by btmoss569 from , California. Jan 30th 2021 Reply


I am in process of buying a newly constructed primary home. The home will be ready in 6 mo. There are change in plans. Now I want to buy it as a investment property. Can the builder cause a problem at loan closing if I apply for investment loan via builder's lender? Builder was hesitant to initially sell the property as an investment prop du to market conditions. Do I close the property as a primary home via builder's lender and then refi it as an investment prop in a couple of mo so I can rent it out?

Jan 30th 2021
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Michael Harris (United)
#740 ranked lender in California - 16 contributions

There are multiple implications to your decisions mentioned. if you close as a primary and the intent is not "occupancy fraud". What if any are the restrictions from the Builder to even restrict your ownership? Is there an HOA? You should not be forced to close with the Builder Lender unless otherwise stated. Close once as you intend. the Builder if restricted occupancy requirement may have grounds for damages and lost deposit unless closed as implied. Then back to 'occupancy fraud". If you payoff the loan with the Builder Lender within 6 payments there will be a large surcharge back to the Builder. That is a problem and you not occupying for the 6 payments is as well.

Jan 30th 2021
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Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,200 contributions

Possibly. Although they shouldn't be, my experience is that the builder's lender is beholden to the builder's whims. There were several possibilities as to why the builder did not want to sell you a home to be an investment property, one of which is that if too many properties get swooped up by investors, it makes it harder for them to sell to people that are looking for a good neighborhood to raise a family in. Experience shows that neighborhoods with a large percentage of owners tend to remain good looking than those with a large percentage of renters. I guess that's because owners have more of a pride of ownership. Regardless of why, you should be honest with your lender and explain why you want to change to investment property. If you don't plan to live there, don't buy it using owner occupied financing to avoid fraud. The lender may try and take away any incentives they may have offered, but you should fight for them. You should also Take a look at getting a competitive bid for a loan from another Licensed Mortgage Broker so you have some leverage. Finally, as Michael suggested, you could close it as a primary residence. If you do, physically move into it for a minimum of thirty days. Once you own it, then you can refinance it into an investment property loan. The lender that originates the loan is usually paid by the financial institution funding the loan. If that loan pays off in a short period of time (Its usually 180 days, but it could be less), the funding bank claws back the commissions paid to the originating company. BUT BE CAREFUL. READ YOUR CONTRACT CAREFULLY. I am aware that some builders put language in their contracts that can force you to repay to the builder penalties if the home is not occupied as the buyer's primary residence for a set period of time, like one full year. In my opinion this should not be legal, and I am not aware of any court cases where this provision could have been struck down, so be careful. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in AZ, CA, GA, OR, WA... In fact, NEXA is licensed in all states except MA and NY and we are pending approval in VA, so give us a call. ~ www.ApplyYes.com 480-889-9000.

Jan 31st 2021
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