12 month owner occupied rule - refinance question

[Ryan A Rodriguez-Wiggins]

Hi All,

We recently bought an owner occupied two family unit, with 3% down as we were in the process of selling our apartment. The apartment still hasn't closed yet, and we are tired of paying the PMI, so we are refinancing the owner occupied to lower the payment and get rid of the PMI.

We would love to take advantage of the low interest down, owner occupied strategy, and do this a few times. Anyone know if we refinance does that start the 12 month "clock" again?

Trying to do everything by the book.

Also, if we did an owner occupied and decided to travel for a few months or be digital nomads, is it okay to rent out that unit temporarily, assuming we aren't applying for another primary residence mortgage

Thanks!!!

[Zach Westerfield]

@Ryan A Rodriguez-Wiggins The rules you are referring to are bank rules, not necessary the law. The risk is when you sign up for a mortgage, you sign a contract. Breaching that contract could be considered mortgage fraud, which is breaking the law. Im not an attorney, but I do believe breaking the law includes and "and" and "intent". 

In reality, its up to the banks to enforce the contract, if they want to. the majority of Fannie Mae backed loans get sold a few months after closing, so the banker you are dealing with isnt even the one holding the loan. Most times they get sold to large national banks, who have better things to do than audit one little loan. So, if you bought a property and intended to stay there 12 months, but something else came up after the fact, you technically did not intend to violate the mortgage when you signed it. As long as you make your payments, banks almost never look into these. 

to answer your question, with most banks if you refi into a owner occupant loan, yes the 12 months starts over. Also, by the book most banks have criteria outlining how many nights you have to be there to qualify as "occupant". I dont remember exactly but its something like you have to be there 20 or 25 nights a month. (Ive had jobs where i traveled 300 days in a year so technically broke this lol). 

In general, banks write very detailed and overarching loan agreements to cover their own A**. Much like a lease agreement with a tenant, this gives them the legal right to enforce it if they want to. However, whether they do, or whether it even makes good business sense to start a legal battle with a paying customer (it doesnt) is up to them.