Owner Occupied- Want to Move Early Due to Drug Dealing + New Baby

[Rob Roy]

Hi Everyone!

My wife and I bought a townhouse two months ago using a 5% down conventional loan.  We had the intention of living there for a year, turning it into a rental and then going to buy another property in the area to rinse and repeat.  However in that time, I've seen and have had others tell me they've seen drug dealing happing a few doors down, and we found out my wife is pregnant with our first child - yay!  It appeared to be a nice townhouse community when we would come by to look at the property before, but after actually living here it's not that great and bringing a baby home to it makes me nervous.

If we were to move out early, I would still want to rent the townhouse out and go buy another house using a VA loan, but am afraid this constitutes as mortgage fraud before the 12 month mark. Is it better to just ride out the remaining 10 months, or does having a baby and wanting a bigger living space preclude me from following the one year owner occupied agreement?

[Jeff Copeland]

Conventional loans usually don't come with an occupancy requirement (though I'd look back and review exactly what you signed at closing...if there is an occupancy requirement, chances are it focuses on your intent). You have to "intend" to live in it as your primary residence in order to meet the lower down payment requirement. 

But at this point, in all likelihood, no one will every question it so long as you pay your mortgage. 

Clearly you had sufficient "intent" (you moved into the property, after all). But you had a legitimate change in circumstances (new baby) that necessitated the early move. 

While I agree that there are other ways to address this (i.e. work with your HOA, neighbors, and/or local law enforcement to improve the community - which will benefit you either as an owner occupant or a landlord), I can't imagine your lender making much of a fuss about this. After all, it's going to take a few moremonths for all of this shake out anyway.