Financing in Boston>Question Details

Ma2fam, Home Buyer in Boston, MA

I intend to purchase a 2-family, both units are leased till Aug12. I aim to use it as primary residence. Can I qualify for owner occupied loan?

Asked by Ma2fam, Boston, MA Wed Nov 30, 2011

I'm a first time buyer and if nothing changes, I plan to live there for a long time. Only problem is I cannot move in within 60 or 90 days of closing (i.e) until August 2012 (as property is leased to tenants) which is required by most mortgage underwriters. The offer is not yet accepted and closing can take much longer than planned, but I often encounter this issue. Often, there are clauses for exceptions. Does anyone have experience in negotiating these issues with lenders? Do they even listen or will ask me to buy it as an investment property. If purcahsed as an investment property, when I eventually move in, can I refinance it as an owner occupied property.

I have extra money for larger downpayment and the rents on the property would cover the mortgage anyway. However, I would like to use it as my primary and only residence once the tenants move.

Thanks

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Andrew Adams’ answer
If you cannot move in within 60 days you will have major problems. The tennents need to be made aware that you will be buying the property and they need to find a new place to live. It will be easier for the existing tennents to find a new place to live earlier than anticipated than it will be for you to close without being able to occupy.
1 vote Thank Flag Link Wed Nov 30, 2011
You will need to be moved in to the property to comply with being owner occupant. Offer the tenants a cash out which could solve the roblem. Maybe the seller will split it with you since they extended the lease.
0 votes Thank Flag Link Mon Dec 5, 2011
Hi,

Yes, it is a sticky situation, but as they always say......you can attract mor flies with honey than with vinegar. If you have extra cash.....you may wish to offer the tennants an incentive to leave ......moving expenses, cash for keys ( as they call it in the Foreclosure world) or provide them with their security deposit or engage an agent at your cost to find them an alternate living arrangement. Since this will be a combined primary residence and investment/rental property......these costs can be expensed.

If you would like some more advice on how to get to a win-win with the tenants.....give me a call or send me an e-mail. I'm more than happy to help. Good Luck with whatever you decide to do!!!!

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0 votes Thank Flag Link Wed Nov 30, 2011
While it sounds like you will continue to have one unit occupied by tenants even in the future you should make sure that the tenants currently there are paying their rent on time and that they are qualified to live there. You do not want to make the mistake of inheriting someone else's bad tenants. You should take the time to "screen" these tenants prior to purchasing. If you have to evict, it can be a nightmare.
Web Reference: http://www.sherriway.com
0 votes Thank Flag Link Wed Nov 30, 2011
During the "good old days" many buyers wanted buildings to be vacant (to allow for condo conversion or rental upgrades) but many had tenants. During those days we had a term "CASH FOR KEYS". This meant that the buyer paid the tenant to leave - the money changed hands when the tenant actually vacated. This could work here. It would be financially better for you to buy/finance as an owner-occupier.
0 votes Thank Flag Link Wed Nov 30, 2011
You seem to have the best answer to your question.
Thank you for sharing.
Please proceed carefully here, and always seek counsel and your mortgage broker advice.
0 votes Thank Flag Link Wed Nov 30, 2011
There is no shortage of available properties on the market. The seller did not do themselves any favors by extending leases 3 months prior to listing the poroperty for sale.
0 votes Thank Flag Link Wed Nov 30, 2011
The tenants have a right to live there until their lease expires. All that can be done is request them to move early but they do not have to accept my request. They can be told that their lease will not be extended beyond August 31st 2012 but local laws do not give owner any power beyond that. The tenants already know that the property is being sold and may have to leave when their lease expires.

From the buyer perspective, only problem is that it seems like we have to take an investor loan and convert it to a owner occupied loan in a few months when the intent has throughout been to use it as an owner occupied property as soon as it becomes available.
0 votes Thank Flag Link Wed Nov 30, 2011
Those are not lender requirements, the source is the standard clause in the mortgage required by the secondary market. The lender cannot change the wording unless they are making a portfolio loan, if that is the case they can write up their own version on the back of an envelope if they want.

If the loan is going to Fannie, Freddie or insured by FHA, good luck on getting any of them to make an exception. You can however re-finance to an owner occupied rate as soon as you move in.
0 votes Thank Flag Link Wed Nov 30, 2011
How would I know if the loan is a "portfolio loan" and not going to Fannie or Freddie? I am in a situation where if I move out of my current house and into the new house I will have to pay back the $8,000 first time home buyer tax credit. I will satisfy the 36 month requirement in May 2013 so I could move into the new house then. Thanks
Flag Thu Aug 16, 2012
I agree with Andrew - this could be a problem if you are unable to get the tenant out within the 60 days. Your mortgage on an owner occupied loan will stipulate that you have to be there within 60 days from closing.

I assume at this point you have a mortgage professional working with you. I would first contact them and then possible talk to an attorney so you know how to proceed to make sure you get the type of loan you want.
0 votes Thank Flag Link Wed Nov 30, 2011
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