Lender "might not" approve new owner occupied loan after 14months

[Eric Benz]

I purchased a house in Feb 2018 and have lived in it ever since. I'm now interested in renting out my current house and moving into a new SFH or multi-family as owner occupied.

When I asked my lender about this he said:

• "If you buy a new home that is a lower price than your current home, and you have only lived in your current home for about a year, the Underwriter may not allow you to call the new one a primary residence, unless we can document why you are downsizing."

I'm interested if anyone else has ran into this and if there is any way to get around this uncertainty.  I don't want to get in a situation where I have an accepted offer and I can't get underwritten.  Obviously I truthfully do plan on living in the new house as owner occupied so if there's anything I can do to prove my true intent I am happy to do so.

[Eric Veronica]

@Eric Benz I am actually very surprised that we don't see more posts like this for as much chatter I see about house hacking. Full disclosure I am not an expert on buybacks, reps and warrants, or mortgage fraud as a whole. With that being said, occupancy fraud is one of the most common sources of mortgage fraud so underwriters tend to ask questions when something doesn't smell right. Occupancy is also one of the grayest areas. Often times underwriting will use their discretion to determine if the move makes sense. A 65 year old person downsizing from a 2500 sq ft SFR to a 900 sq ft duplex because they are snowbirds who spend winters in Florida makes sense. A 30 year old person who just got a raise at work, just got married, and just had a baby trying to explain the same downsize ehhhh... that is a steeper hill.

Are you moving closer to a new job?

Did your income decrease?

Are you moving closer to a sick parent?

Did you get a promotion where your job has you traveling 50% of the time leaving you unable to take care of the larger house?

These may all be acceptable reasons. 

If your reason is "I am trying to buy 10 houses using owner occupied financing over a 10 year period as a way to work around the guidelines and acquire investment properties with 5% down"  then that might raise a few red flags.  Even though this  might not technically be against the rules some might think it goes against the spirit of the rules (in my opinion)  I am sure there are loan officers who will have a different take but truly the devils in the details.