Committing Mortgage Fraud via Househacking Strategy

[Cameron C.]

Hey BP,

I'll try to keep a long story short.  Currently about to purchase a 4BR 2.5 bath single family that I rent in Pittsburgh and turn my 3 roommates into tenants.  The advantage of this is that it will continue to be my primary residence, however, I will be able to have them pay the mortgage and I will be able to get conventional owner occupancy financing for the deal...or so you would think.

In a recent conversation with my mortgage broker, this came up.  Despite already being pre-approved and almost having a deal in place, we decided to throw out some "what ifs" around.  According to him, you cannot, under any circumstance, collect rent (income) from you primary residence.  I was sure to dig deeper and ask how this would apply to multi-families etc etc, however, he proceeded to tell me if the borrower knew this was his/her intent from the onset that this be disclosed and therefore down payments would need to be of at least 15% because this would be deemed as an "investment".  He went on to explain that this and another situation like say, buying the house today as owner occupied and turning it into a full rental in 3 months would constitute mortgage fraud because of the advantage one could get as it relates to the acquisition of the loan.

I have an extremely hard time believing this considering "house hacking" is such a common strategy across the board.  Could it be that this is lender specific?  For instance, this conversation took place with Quicken.  I'd like to stay away from the big lenders altogether but I've had a great interaction thus far and am being given super competitive rates compared to the smaller, local lenders.

That said, I'm looking for a little guidance and/or perspective as to whether or not this may be an issue for me down the road.  My full intent for this property is to buy it today, live in it and have my 3 roommates pay me rent and then in 2 years move out all together and it to continue as a rental for many years to come. 

Thanks,

Cam

[Dustin S.]

I believe that this mortgage broker is incorrect.

You need to move in within 60 days of closing and occupy the property as your primary residence for at least 1 year.

You are allowed to have roommates, family, tenants in your primary residence so long as you are still living there for 1 year. It's really none of their business what you do so long as you are fulfilling the obligations that you agree to when you close the loan (move in within 60 days, live there 1 year). I wouldn't even mention it.