Purchasing an investment property with 5 % down?

[Account Closed]

Hi,

I'm very new to Real estate and I'm thinking about buying a condo here in Chicago. I'm quite aware most lenders won't finance an investment property unless I give a 20 % down payment. 

I want to give a 5-10 % down payment on the condo I want to buy. My real estate agent found me a lender who could "work things out". After speaking to the lender, he told me he just won't tell the underwriter the reason I'm buying the property unless they asked so technically the underwriter will assume this property will be owner's occupied. The lender has been in the market for 15+ years.

I wanted to know if this is common or if there are any legal consequences? Last thing I want is to sign a contract and then lose the earnest money. Any advice would be greatly appreciated. 

Dan

[Brie Schmidt]

@Account Closed - I think losing your earnest money would be the least of your worries, especially if it is a FHA loan - this is what the penalties are

Mortgage fraud is a serious crime, and one punished by significant penalties. Because mortgage fraud can involve different crimes at either the state and federal level, the potential penalties associated with the crime differ widely. Mortgage fraud is typically charged as a felony offense, but misdemeanor crimes are possible in cases where only a small amount of money is involved, typically less than about $1,000.

• Prison. Prison penalties for mortgage fraud can be significant. A conviction for federal mortgage fraud charges can result in a federal prison sentence of 30 years, while state convictions can last a few years or more. Misdemeanor fraud convictions can bring jail sentences of up to a year.

• Fines.Fines for mortgage fraud are often extremely high, especially when professional fraud is involved. A conviction for a single count of a federal mortgage fraud can result in a fine of up to $1 million. State fines can range from a few thousand dollars for a misdemeanor convictions to $100,000 or more for felony convictions.

• Restitution. Mortgage fraud convictions often include restitution payments as well. Restitution is different than a fine, though they both involve money. Restitution is designed to compensate the injured party for your wrongdoing, while the government imposes a fine as a penalty. If, for example, you are convicted of mortgage fraud after you make false statements when applying for a mortgage, you may have to pay restitution to the lender in addition to your fines.

• Probation. Probation sentences can be imposed for a mortgage fraud conviction separately from, or in addition to, fines and prison sentences. Probation sentences for mortgage fraud typically last at least one year, but longer terms are common. Someone on probation must meet specified court requirements, such as making regular reports to a probation officer, submitting to random drug testing, and refraining from committing other criminal acts.