Conventional Loan Violation via house hacking?

Question

I'm working on getting my first property under contract, and I would really appreciate advice on whether my plan would be violating the terms of the mortgage.

PROPERTY & LOAN INFO:

-Conventional Loan for a Primary Residence

-Single Family 2 Bedroom Home with a basement and an accessory until (360sqft tiny home).

PLAN:

-My partner will be on the loan (and therefore must have the house as her primary residence for 12 months), and we will build out the basement as her living space.

- Will rent out the rest of the house (2 other bedrooms and accessory until) via long term rent or Airbnb.

MY QUESTION

My mortgage lender is concerned that renting on the rooms to long term renters or Airbnb during the first 12 months may violate the mortgage agreement.  I have researched everything I can on OO loans, and I don't understand their concern. Please respond with anything you think helpful. Thanks!

James Carlson · Answer

@Grant Shipman First off, great idea. Airbnb is a super easy way to house-hack and build up cash for your next purchase. I'm an Airbnb devotee, so my opinion should be taken with a grain of salt, but I'm always trying to get my buyers here in Denver to consider Airbnb. (Whether it's in a house with a basement apartment/carriage house or just renting a room.)

Where's the property you're about to close on?

Yeah, I would tend to agree with @Myka Artis . They're likely not going to care as long as you're paying. But I'm not even sure what provision of your closing docs would have a prohibition on Airbnbing a portion of your property. I'm wondering if your lender thinks that by doing so, your place would be considered an "investment property" and therefore not allowed for a primary residence loan. If that's the problem, I'd ask your lender to research a little more or talk to some other lenders.

I'm a fan of open communication, so I'd simply shoot an email to your lender and ask what document you sign that prohibits you from Airbnbing a portion of your primary residence.

If you PM me, I'll reach out to a few lenders I trust and see if they can explain any better.

Good luck!

Bill S. · Answer

@Grant Shipman perhaps the concern is that you/your girlfriend needs the income from the rental of the units to qualify? If that's not the case, why does your loan officer even know what you plan or plan not to do with the property. IMO it's none of their bees wax. If the loan person continues to make an issue of it, I would start with another lender and keep what you plan or plan not to do with the property to yourself. Your girlfriend will be living and that should be the end of the flow of information.

Craig Curelop · Answer

@Grant Shipman - I don't see a problem with this at all. In fact, I am doing something similar. I have an FHA loan out on a duplex where I live in one unit and rent the other. In order to make hefty cash flow, I decided to AirBnb a bedroom in my apartment. There shouldn't be anything wrong with this.

You will not be able to count projected AirBnb income towards your income in helping you qualify for the purchase, but I don't see a reason why you wouldn't be able to AirBnb.

As the guys above said, if your making your payments in a timely manner, the lender isn't going to care. If your lender is sketched out by the idea, I'd be happy to introduce you to my lender.

Merritt Noel · Answer

@Grant Shipman I congratulate you your idea to house hack with a great plan in my opinion!  Being a lender as long as you are occupying the property you can do whatever you want with the other rooms.  All that I care about is someone on the loan occupies the property and you make the mortgage payments.  People get in trouble when they lie about it being a primary residence and never occupy the property.  Mail never goes to property and red flags go up.  There are tricky ways that lenders these days verify a borrower is actually living in the property without your knowledge.

Feel free to contact me with any additional questions.  And good luck with your plan...sounds solid to me!  Take Care

Myka Artis · Answer

I don't see this as a problem but I'm no lawyer. I believe that's how most Airbnb's work in your area anyway because you're not allowed to rent out your space if you don't live there. My personal suggestion is as long as they're receiving a check I'm pretty sure they aren't going to show up to your house making sure you're not violating the agreement. It's easier to ask forgiveness than to ask permission. I'd definitely point you in the direction of @James Carlson he's the Airbnb guru in your area and knows the laws really well.

Conventional Loan Violation via house hacking?

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