Mortgage Fraud or Legal Finesse?

[Christina Zimmerman]

Hello! I am going to give a quick run-down of my situation to see if what I want to do would be considered mortgage fraud or finessing the system

I bought property 1 in 2019 and lived in it for 1.5yrs. I fully rented it, qualified for another primary residence loan and bought a second property (new primary residence) in Feb. 2021 and house-hacked.

As we all know, residential properties have appreciated significantly. I knew that I had equity in property 1, but, now that it was considered an investment property and cash-out refinances were capped at 70% LTV, it wasn't quite worth it for me to refinance property 1 as an investment property. Unfortunately, in May 2021, my dog was attacked by my tenant's dogs at property 2, and my 1st property happened to be vacant at the time, so I was able to fully rent out property 2, move back to property 1 and cash-out refinance property 1 at 80% LTV as my primary residence. A dog attack was a legitimate excuse for moving primary residences so quickly in the eyes of the bank, as it was a safety issue.

With the money I pulled out from property 1, I am looking to buy another property and currently have one in my sights. This is the current situation:

I will purchase property 3 with 15% down as it will be an investment property. I will be doing significant rehabs to it (estimated time to complete 2-3 months), so, in order to save some cost on labor, expedite the process, and generate cash flow, I plan on moving in to this hypothetical property 3 and fully renting out property 1 (although I just refinanced it as my primary residence on 7/21). After I rehab property 3, I will refinance to recoup some of my out-of-pocket costs. Since I will be living in it, can I refinance it as a primary residence 2-3 months after financing it as an investment property and 5-6 months after refinancing property 1 as my primary residence? I know the general rule of thumb for banks is to lend on a primary residence 1 year prior to the last loan, unless there is a legitimate excuse like moving to a different city/state, becoming pregnant, etc.

All of these are legitimate moves that I've made, albeit very quick. I'm am trying to hustle!

In short, would refinancing property 3 as a primary residence be an option for me (where I can pull out 80% of equity and take advantage of lower rates vs 70% of equity as an investment property and higher mortgage rates)?

Here's a timeline of my financing:

8/19 Purchased Property 1 as primary residence

11/20 Fully rented property 1

2/21 Purchased Property 2 as a primary residence

5/21 Dog was attacked by tenants dogs at property 2, moved back to vacant property 1

7/21 Refinanced property 1 as a primary residence

Theoretical Timeline:

9/21 Close on property 3 as an investment property

12/21 Refinance property 3 as primary residence

I hope this all makes sense. Just trying to cover my *** and make sure that this would be a legitimate move and not something that looks fishy. I will actually be living in property 3, after all, just less than 1 year after my last primary residence loan. Worst comes to worst, I refinance property 3 after rehabbing as an investment property and pay the higher rate/get less cash out.

Thanks in advance for taking the time to read and answer! Any and all advice is appreciated, even hypothetical situations I have not discussed (like potentially HELOC property 3 post renos?)