If your intention is to truly use it as a second home - sign the rider.
Should your situation change in the future - send a registered letter to the lender or servicer explaining your situation.
This keeps you in compliance and the bank will probably not do anything unless you go into default.
Good luck and congrats on your new home!
We shall see what happens...but it's a whole lot of unnecessary stress. The truth is the lender was sloppy in the way they did the loan and they were not able to sell it as they wished (to the secondary market). Now they are trying to go after us.
They have called the loan due, but it remains to be seen if their arguments will hold up in a court of law.
If your income is below a certain level it's more beneficial to have a rental property, tax wise, than a second home since you can take a depreciation deduction (and other expenses such as HOA dues, that you cannot normally take as a primary or second home).
You should not assume. When you assume you make an A$$ out of U and ME
You have to be careful when signing contracts. Despite what many people are crying about and many in washington dc are trying to do, contracts mean something. You are and will be expected to live by the terms of that contract.
"none of them had ever heard of any homeowner running into lender problem"
Congratulations, you could be the first case they hear about. Doesn't that make you feel special?
It is better to be safe than sorry.
that sums up everything I said above.
So. I'm not going to advise you to put yourself in jeopardy. You understand the terms and conditions of the loan. It says so right in Section 8:
- Borrowerâ€™s Loan Application. Borrower shall be in default if, during the Loan application
process, Borrower or any persons or entities acting at the direction of Borrower or with
Borrowerâ€™s knowledge or consent gave materially false, misleading, or inaccurate information or
statements to Lender (or failed to provide Lender with material information) in connection with
the Loan. Material representations include, but are not limited to, representations concerning
Borrowerâ€™s occupancy of the Property as Borrowerâ€™s second home.
There you have it. Also, when you sign the final loan documents at closing, you'll be signing a separate but similarly worded statement.
Except that when you sign that one, you'll be committing fraud.
Hey, I don't make the rules. I just report on what I know about them.
Just to clarify, when I said I talked to my lender, I meant that I talked to my lender's broker. I haven't actually talked to any of the loan processors who work for the lender because I am worried I will raise red flags. I also talked to 2 property managers, 2 realtors, and 2 insurance brokers local the area where my second home is, and none of them had ever heard of any homeowner running into lender problems when they put their second homes on the vacation rental market. This is a location where many of the homes are occupied seasonally, so I assume that many were financed similarly. It makes me feel better knowing that none of the professionals in the area had ever heard of people being restricted from renting because of the way their loan was structured. That doesn't guarantee I won't run into problems in the future, however. I signed the rider because my intention for now is to use it as a vacation home. But one of the main reasons why I am buying in that location is because rentals do well, and it safeguards me should I ever need to offset my ownership expenses in the future.
Thanks all for your feedback. I welcome any additional thoughts or suggestions. I haven't closed yet!
Jaqueline hit it on the mark. We can't really give you a 100% answer to your question, just guesstimates.
You should really be talking to your agent's broker if they don't have any answers. Your lender should be knowledgeable of the scenario that is going on right now.
With an investment property the loan rate will be slightly higher.
The only way it can be a second home, is if the second home is larger than your primary residence and has to be your primary residence to have a lower rate.
It might take close to 2 weeks to restructure the loan since we are on the last two weeks of the month.
Have your lender do some hard thinking on how to resolve this.
Let us know how things workout, that way if others have the same scenario, they can benefit from your answers.
Give me a thumbs up if this helps,
Jes Sierra, B.Sc.
Chino Hills, CA
Does this sound right, or am I being mislead my my agents?
However, you need to ensure that you're not in violation of your financing contingency by switching lenders and loan programs at this late date. I suggest you or your agent contact the seller, explain your situation, and ask for an extension.
The IRS is only telling you how they're going to tax you in certain circumstances, they're not defining how you're allowed to use the property.
The lender is, however, defining the terms under which they will lend you money, and one of those is that you do not use the property as a rental. The other terms, which benefit you, are a lower interest rate and down payment than on a non-owner-occupied home.
So. You can't have it all, you have to pick and choose.