What is the maximum rent back time period allowed by the bank on a primary residence loan?

Asked by Mike, San Jose, CA Mon Mar 8, 2010

We asked our agent (seller's agent) to get longer than 30 days rent back. He told us it is not possible due to the fact the buyers loan is based on owner occupied property. To rent back longer than 30 days will risk the buyers loose their loan. Unless it is a rental property loan, there is a limit of ONLY 30 days to rent back required by the bank. But we know our friends agent negotiated 6 months rent back for them in order for their kids to finish the school year. We are having a hard time to find a short term rental property since we are looking for a new house.

Did we have a poor negotiation in the terms of the rent back?

What is the maximum rent back time period allowed by the bank on a primary residence loan?
Can the rent back be negotiated and done any differently, in order to get longer than 30 days?

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Gilbert Rich…, , Santa Clara County, CA
Mon Mar 8, 2010
30 Days, otherwise you are at risk for occupancy fraud. FHA would let someone give up to a 45 day rent back but most lenders have an overlay guideline against that as of now.
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Andrea Wince…, Agent, Milpitas, CA
Mon Mar 8, 2010
Hello Magic, how long ago did your friends get a 6 month rent back? We've experienced stricter lending standards as of late, in many term categories. In the past, some people bought income/investment property under the pretense of owner occupied so they could get a better interest rate/terms on their loan. Loan interest rate is higher on a property that you do not intend to owner occupy as well as a higher required down payment. Due to dishonesty on some people's part, the banks have become quite strict about the owner occupancy requirement. I represented a buyer purchase last year, but he was still on military duty in another state, the lender let us go 90 days on occupancy, however, he had to sign an affadavit, show documentation, etc. I believe that if you don't ask for anything, the default is 30 days occupancy, however, rules of owner occupancy may vary from lender to lender (bank to bank) so I'll be curious to see some loan brokers jump in here and give us their opinion.
0 votes
Roland Barcos, Agent, San Jose, CA
Mon Mar 8, 2010
Hi Magiclll2003 - It's true that loans based on owner-occupancy means just that and the bank would have different criteria for an investment property. Bank policies vary, but most lenders limit rent-back periods to 30 or 60 days. There also may be Fannie Mae or Freddie Mac underwriting guidelines that must be followed. If your agent has checked with the buyers lender and been told that they have a 30 day limit, there's nothing to negotiate.
You should also be skeptical of anyone claiming to have a 6 month rent-back, as you don't know the details of that contract. Perhaps an investor is buying that property, or there could be a case of lender fraud.

Good luck,
0 votes
Kevin Tran, , San Jose, CA
Mon Mar 8, 2010
Most lenders allow 60 days. Anything more than that will be treated as a rental property.

Good luck!

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