How long do I have to live in a home originally purchased and financed as home-owner occupied before renting it out?

Asked by Abel, Daly City, CA Mon Apr 16, 2012

I bought a house in 2008 in San Mateo and have lived here for the past 3 years. I am thinking about buying another one in the same city and rent out my current one. Question 1: my current home loan interest rate is based on owner occupy, if I rent it out, will there be any issues or problem because it was not originally purchased as a rental property but primary home. Should I notify my lender when I rent out the current house? Question 2: If I am moving into occupy the new home that I am thinking to purchase, am I qualified for primary home mortgage rate or second home mortgage rate? Thanks.

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7
Steven Ornel…, Agent, Fremont, CA
Mon Apr 16, 2012
Abel:

There is no need to contact your current lender, the expectation (or shall I say “requirement”) for most loans is occupation of at least one year, which you have met.

Regarding the new property, you would have to go through the process of being pre-approved (your second "primary home mortgage") and counting all of your current home's expenses as well. Of course, a primary question will be whether the lender will allow you to count rental income and or what you must do to have them count rental income.

I would suggest you contact the following individual to perform your pre-approval ( See: http://www.Steven-Anthony.com/GettingStarted for more info):

Julie Thall, jthall@opesadvisors.com , Direct: (650) 931-0606

-Steve
1 vote
Cal D Caylor, Agent, McKinney, TX
Mon Apr 16, 2012
I would not notify the mortgage company. You bought it as an owner occupant - it is your house you can rent it out anytime you want. I am not sure about yoursecond question. My guess would be that it would be a second home which should not matter. My wife owned two other homes in Florida when she bought her home in Texas and it was no different than a first home mortgage.
1 vote
many banks have a minimum distance requirement for "second home" mortgages - just ask your mortgage broker if that's the case (some banks loan types are more stringent about this than others)
Flag Thu Sep 29, 2016
George Raymo…, Mortgage Broker Or Lender, Fort Worth, TX
Mon Apr 16, 2012
Back in 2008 there was no written law that said you must live in a property for x-amount of time. There are currently rules, but that has noting to do you with you. You are not required to notify anyone. If you are looking to buy another home, there is a strategy to follow that will allow you maximize your purchasing power. There are a couple of options for you if you want to put the minimum amount down (3.5% or $0 if you are a VET) on your next purchase. I would speak to a lender before you move out and make any moves. An ounce of prevention is worth a pound of cure. You feel me?


Best of Luck!
Web Reference:  http://www.AFN-loans.com
0 votes
Michael Kapr…, Agent, Burlingame, CA
Mon Apr 16, 2012
Good Evening Abel,
Since you have lived in your home since '08, you have more than enough time in to rent out you home. I have worked with many clients in buying rental property in the last few years and I have never heard a lender requiring that you buy a bigger house or in a vacation area?

Yes, you will have to qualify for both payments as some have said but I do know that if you have a 1 year lease signed by a tenant (can't be family or friend) your lender may take up to 75% of that monthly payment as income.

With 35% of the sales in the area being investors and interest rates being so low nows a great time to buy a second property. Right now it's the best investment you can make! Your first step should be to talk to a lender,
I require all my new clients to be pre-approved prior to working with me.

Good Luck,
Michael
0 votes
Michael Chal…, Agent, San Mateo, CA
Mon Apr 16, 2012
Yes, Most lenders typically only require that you live in the house for 1 yr prior to renting it out.

If your buying another home in the same area, it must be bigger and better than the house you currently live in. If it is a smaller house, the lenders will question if you will truly be moving into the house, and may categorize it as an investment. ....which can be more expensive and have higher down payment requirements with stricter guidelines. For example, if your moving from a 3 bed 2 bath 1500 sqft home, into a 4 bed 3 bath 2800 sqft home, you will not have a problem. If your doing the opposite, you may be subjected to investment loan guidelines.


Also, if you do not show a history of owning rental properties per your federal tax returns...you will have to qualify for both payments on both properties, and you will not be able to factor in any potential rents to off set your debt to income ratio. It is important to clear this up with your loan officer before you make an offer.

Also, almost all "2nd home" financing require that the home be located in a "resort like" or "vacation" area...i.e. palm springs, lake tahoe, napa, etc...and cannot be geographically near to your current home. If the home your buying is in the same general area as your current home, you won't qualify for 2nd home financing.

Feel free to call me with any questions

Regards

Michael Chalhoub
Dolphin Real Estate
650.465.9036 Direct
0 votes
Mike Boos, , San Mateo County, CA
Mon Apr 16, 2012
There is no need to notify your lender. You have occupied the property for 3 which satisfied you obligation. Your loan will be uneffected by the change. Feel free to ask any other questions you may have.
0 votes
Jeff Tung, Agent, Burlingame, CA
Mon Apr 16, 2012
Hi Abel,

I agree with Cal, that you don't have to notify your lender and the loan for your new home should be an owner occupied loan as well.
0 votes
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