My loan officer might be suggesting Mortgage Fraud

Member since 2022 · 2 posts · 3 votes

“Well you can always just state your intent is to make it a primary residence. Once you get the property then whatever, life happens you may change your mind if you catch my drift” - this was followed by a laugh.

That’s what my lender said to me when I asked him if there were any loan options for less than 20% for a second home/investment property within the same city I live in. (Midwest college town) I used this same person for my primary residence about a year ago.

After reading online it appears to be mortgage fraud, but if life circumstances change it’s kind of a grey area

Is this actually an option? How risky is it if the loan officer is basically suggesting it. This would be a visible property on Airbnb. I wouldn’t have considered this as an option if the loan officer didn’t suggest it.

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Scott E.

Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes

If your never intend to occupy the property, then you should not state that your intent is to occupy the property. Follow your gut here, this loan officer is misguiding you.

The grey area comes in if you buy the property with the intention of occupying it, then you do actually move into the property as planned, and then a few months later some unforeseen life circumstance comes up (death, divorce, out of state job offer, etc). That is the "life happens" scenario that is impossible to forecast when you are applying for a loan.

Loan officers are generally paid a very low base salary and the majority of their income is commission from actually writing loans. This is an example of a loan officer getting desperate during some slow times and blending the lines between legal and illegal.

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Colton Hahn
Specialist · Member since 2021 · 322 posts · 273 votes
4y
I used to be a loan officer a few years ago, it sounds like to me that loan officer is desperate for a sale.

That is absolutely unethical to suggest that you commit fraud, and frankly they should not be in this line of work. It's "advice" like that from loan officers, that helped cause the '08 housing crisis.
Committing fraud is bad, actually.
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Ryan Beckley
OP
Member since 2022 · 2 posts · 3 votes
4y
Quote from @Colton Hahn:

I used to be a loan officer a few years ago, it sounds like to me that loan officer is desperate for a sale.

That is absolutely unethical to suggest that you commit fraud, and frankly they should not be in this line of work. It's "advice" like that from loan officers, that helped cause the '08 housing crisis.
Committing fraud is bad, actually

It made me question if this was actually an option, which based on your response it is not. As much as I would like a good deal, it sounds like it’s not worth the risk. Thank you for the Response and confirmation this is not an option.
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Kevin Romines
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
4y
If a person gets caught committing mortgage fraud / bank fraud, the punishment is a million dollar fine and 30 years in the pen. Is that worth the savings you could have with the down payment? I think not. Bad advice from a guy that knows better. Don't do business with a person of this nature.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
4y
DSCR Loans can finance up to 85% if you do not plan on living in it.
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Reid Chauvin
Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
4y
@Ryan Beckley - sounds like your only legitimate option is investment property loan, which has a min. down payment requirement of 15%, but much better interest rate pricing with 25% down.
If the home wasn't in the same town you already live in, and if you planned to spend some time occupying the home throughout the year, you could potentially go the route of a 2nd home loan, which requires 10% down.
What your lender is suggesting is pretty blatant mortgage fraud. One of the documents you're required to sign at closing indicates that you are planning to occupy the property as your primary residence. Shame on that guy for suggesting that to you. Unfortunately, he's not the only one out there risking it all for a buck.
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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
If your never intend to occupy the property, then you should not state that your intent is to occupy the property. Follow your gut here, this loan officer is misguiding you.

The grey area comes in if you buy the property with the intention of occupying it, then you do actually move into the property as planned, and then a few months later some unforeseen life circumstance comes up (death, divorce, out of state job offer, etc). That is the "life happens" scenario that is impossible to forecast when you are applying for a loan.

Loan officers are generally paid a very low base salary and the majority of their income is commission from actually writing loans. This is an example of a loan officer getting desperate during some slow times and blending the lines between legal and illegal.
4 Reply
Stephanie P.Pro Member
Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
4y
Quote from @Ryan Beckley:

“Well you can always just state your intent is to make it a primary residence. Once you get the property then whatever, life happens you may change your mind if you catch my drift” - this was followed by a laugh.

That’s what my lender said to me when I asked him if there were any loan options for less than 20% for a second home/investment property within the same city I live in. (Midwest college town) I used this same person for my primary residence about a year ago.

After reading online it appears to be mortgage fraud, but if life circumstances change it’s kind of a grey area

Is this actually an option? How risky is it if the loan officer is basically suggesting it. This would be a visible property on Airbnb. I wouldn’t have considered this as an option if the loan officer didn’t suggest it.

Was this the guy? Obviously you knew/felt the right answer before you posted. Well done. No need for you to go to prison.
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