Need practical advice on Second Home vs Investment Property Loan

[Christopher Cordero]

I am working towards my first rental property and found a property that I may be sending an offer on.  I currently own no properties, and I live and work out of NJ.  I'm looking to buy in FL.

I've talked to a handful (5+) mortgage lenders now and I'd say about half of them, including a real estate agent, suggested to me to consider calling this property a "Second Home" where in fact it is intended to be rented out.  They all explained this recommendation in the same way: that it's perfectly common for people to buy second homes in FL, especially people like me who are first-time homebuyers.  They sometimes even suggest that if I wanted to, I could just decide to live in it for a few months before moving back up to my apartment in NJ and then renting it out.

Is this a bad idea?  I think this is technically mortgage fraud, but the fact that so many people are suggesting it to me makes me think this is more commonplace than usual.  Furthermore, the difference in interest rate is pretty large - from what I've seen it's a full percentage point difference with investment property loans being greater.  Ideally, I could lock in the lower rate so that my cash flow looks better but I 100000% don't want to get in trouble or lose my property on a technicality or something.

Does anyone know how this works?  Is living in it for a few months and then later renting it out actually an option?

[Daniel Hennek]

Stop listening to people that don't know what the hell they are talking about!  If you declare a property owner occupied that you intend to rent out you are ABSOLUTELY committing mortgage fraud.  Second homes are considered "owner occupied".

Mortgage fraud is basically "any material representation that would induce a lender to give you a loan under certain terms when they otherwise would not".

Telling them it's second home when you actually intend to rent it out as an investment property is a material representation.  It still blows me away how many people think this crap is acceptable.  Trust your gut and how you read things, not others suggesting it's ok to misrepresent your intentions while getting a mortgage loan.

It really is THAT SIMPLE!  If your intentions are to rent it, then by signing the application declaring the subject as a "second home" and signing the second home rider and owner occupancy affidavit you'd be lying "in order to induce a lender to give you a loan on certain terms".  The terms would be different for investment as you have stated, and there is the hitch.

Google "occupancy fraud" as this is the specific type of fraud you're talking about.  The managers of those loan officers you spoke would most likely want to know that they were coaching you to commit occupancy fraud.  Those conversations can be a little tricky but MLOs should be coached on fraud of all sorts because people come at us with that crap all the time.  If your intention is to actually occupy the property for as a second home then you're fine.  It's about your intentions.  While nobody can tell you your intentions, you'll know if you commit mortgage fraud or not and have to decide if you want to flirt with the law and risk a loan officer or manager submitting a Suspicious Activity Report to FinCEN.

For context, I own a mortgage company and am my companies compliance officer so I'm not some rando spouting nonsense like the person above.  Follow this link for more information on mortgage fraud from FinCEN.

https://www.fincen.gov/resourc...