10% down Illegal or legit for second home option with rental?

[Murali Jesudoss]

Hello BPers, 

Having lot of fun last few weeks looking at different markets and closing couple of properties in Feb. Will share more once closed.

I wanted to get people's thoughts on some ideas I heard from some reputable TK providers. There has been lot of attractive deals with 10% down second home option for new construction homes in few cities. 

It is really interesting because, as an investor, we are only putting 10% down and even with PMI, if the rent value is there, it will still cash flow. Also, the interest rates would be really attractive as well due to the second home loan.

Here is the problem.. The requirement they state from the lender is that you need to sign a affidavit that you intend to stay for 1 year in the home to have this as second home option, but you are only required to not rent for the first 14 days and rent the home after 14 days or so.

I had done lot of research on this and there is no place that it mentions about the 14 days or so. Every web site states that you should not rent it for the first year. I initially thought that this is more of a lender option where some lenders might come and say we could do this option as we will not go after the investors (which would be OK if they want to make more business this way).

However, after talking to few of my local lenders they all state that this is not a lender guideline but more of Fannie Mae guideline and as an investor, it does not fall on the lender to enforce but more on the investor to make sure they follow the affidavit signed with the lender. Especially if there is a audit on this loan, this could be considered as an "occupancy fraud". In this case, the lender won't be liable and it would fall on investor and he/she would get into trouble. 

I know lot of newbies might go after such loans,  due to the benefits it offers and wanted to understand if anyone else had thoughts on this.. If this really not a big deal or would be considered fraud.. Since this is being offered by some reputed TK providers, I wanted to understand, if this has been vetted by fellow BPers and may help some new investors choosing this option either way(including me).