What is the reasoning that they make you sign an owner occupancy agreement anyway?

Asked by Momt, Arizona Sun Jun 17, 2012

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6
Loren Hoboy, Agent, Phoenix, AZ
Mon Jun 18, 2012
Bank owned properties like HUD, Fannie Mae, and Freddie Mac, being government owned, have policies/rules that for the first 7-15 days of a listing they will only sell to owner occupants (buyers committed to moving into a house shortly and having it as their permanent residence (over 6 months per year). This is a matter of public policy and the law. The objective is to stabilize neighborhoods with owners not renters. Neighborhoods with more that 50% rentals are usually lose value.

If you lie, here is what Fannie Mae says "In the event that I do not occupy the property as my primary residence in accordance with the above certification, I shall pay Ten Thousand Dollars ($10,000) to Seller as liquidated damages, which amount shall be in addition to Seller’s right to retain any earnest money deposit and any other funds then paid by the Purchaser as liquidated damages pursuant to Section 19 of the Real Estate Purchase Addendum and any other remedy available to Seller at law or equity. Additionally, I agree to pay Seller’s reasonable attorney fees and costs incurred by Seller in enforcing its rights hereunder."
1 vote
Mack McCoy, Agent, Seattle, WA
Mon Jun 18, 2012
Owner-occupants will usually default on their rentals before risking their own home.
0 votes
Bill Parker,…, , Scottsdale, AZ
Mon Jun 18, 2012
HI Momt:

The underlying reason is there is increased risk to the lender if the property is used as an investment property it will become a foreclosure, short sale, etc. If you own a primary residence and an investment property and things go wrong, as we have recently seen, which property are you going to let go first? In the vast majority of cases, it will be the investment property.

Remember, lending money is all about the risk/benefit analysis. For every increase in the possibility something will go wrong, the lender is going to charge more for that circumstance. Primary residence vs. investment; just reducing your interest rate with a refinance vs. pulling cash-out; higher credit scores vs. lower; higher loan-to-value vs. higher down payment--you get the idea.

It is all about offsetting the lenders' increased risks with higher fees being charged to compensate.

Contact me if you have any additional questions or need a great lender with whom to work...

Bill Parker
480-993-3080
Bill.Parker@LegacyG.com
0 votes
Kathe Smith, Agent, Gilbert, AZ
Sun Jun 17, 2012
Owner occupants get a better interest rate on financing. If you fib, you will be in a heap of trouble. Be honest. Find a good real estate agent that is a REALTOR, and they will team you up with a good Lender.
0 votes
Rob Weber, Mortgage Broker Or Lender, Plainfield, IL
Sun Jun 17, 2012
The number one source of mortgage fraud is occupancy misrepresentation. Don't do it, you could end up being sued or worse yet, in jail.
Web Reference:  http://Robweber.com
0 votes
Roswell Moore…, Mortgage Broker Or Lender, Scottsdale, AZ
Sun Jun 17, 2012
To be sure all parties involved fully understand & acknowledge what the occupancy of the property will be once the loan is funded.

Helps to eliminate misunderstandings & potential loan fraud, among other things...

Hope that help,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct
http://www.ezAZloan.com

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline loans (NO minimum credit score, NO appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, USDA, Jumbo, Conventional, plus, we allow Escrow HoldBacks!
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