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Asked by Joep, Boston, MA Tue May 13, 2008

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Answers

5
Alan May, Agent, Evanston, IL
Tue May 13, 2008
Lying to a lender is a federal offense, punishable by fines and imprisonment.

Are better terms worth that risk?
2 votes
Trey Bowden, , Edmond, OK
Wed May 14, 2008
Joep,

Your question does not indicate whether or not you currently own a home or if the home you are considering purchasing would be the only home you own.

If you currently own a home and the home under consideration is in your same general area, all the lenders I work with would catch this and require the property to be classified as investment. On every loan application there is a section called R.E.O. (Real Estate Owned) and you are required by Federal Law to list all properties you own. This is a disclosure on your part, but every underwriter checks public records to determine if what you have declared to be true is in fact true.

If you are currently not a home owner but are looking to buy this home as your primary occupancy home and then decide to move out a few months later, that's a diferent situation. When the underwriter checks public records they will not find that you own any other properties.

I have some customers who when purchasing a new home have moved out of an existing home that they own and have turned that existing home into rental property. Some have refinanced those mortgages into investment loans, others have not. Some have been forced to refinance when their lender discovered that they no longer lived there. Others have never been discovered.

To knowlingly lie on a loan application and then sign your name to the application's page three sets yourself up for fraud investigation. I don't know about you, but I prefer waking up in my king sized bed every morning rather than a twin bed held to the wall by chains.

If you're looking to cash flow an investment property, figure worst case scenario, which will be the higher rate. If you somehow are successful in getting the lower rate by falsifying the occupancy status, you could be discovered and forced to refinance at a higher rate, then your property will not likely cash flow according to plans.

Good Luck!

Trey Bowden
Mortgage Lender
Oklahoma
(405) 340-3277
1 vote
Bart Vickrey, Agent, Schererville, IN
Tue May 13, 2008
It is never a good idea to lie to your lender. If you do not have enough capital to buy an investment property you need to wait until you do. Or you can look to raise funds from friends and family members to help get you into the deal. If the deal is good the money always comes. I'm not sure what you are buying but you can still get into an investment property with only 10% down if you have good credit.
1 vote
Ute Ferdig, Agent, Newcastle, CA
Wed May 14, 2008
I think you know the answer to your question yourself. Owner occupancy is a material fact and lying about it in your loan application does not get better or worse depending on the chances of getting caught. I am sure your standards of behavior are higher than that and you should not abandon those standards of good conduct when it comes to purchasing a house, whether it's for investment purposes or not. There's no business person defense for committing lender fraud. Don't even think about it as I can tell you that you'd not like any of the consequences of getting caught.
0 votes
Greg Berta, Agent, Lancaster, PA
Tue May 13, 2008
The answer is: that depends! It is never a good idea because you are breaking the law and the penalties can be severe (fraud etc.). Also everything that is submitted to a lender has to be confirmed by someone else whether it is employment info from the employer, bank information from your bank or credit info from the credit bureau. In addition a certain number of transactions are audited by the lender after the deal to check for compliance. All in all its just a bad way to go.
0 votes
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