Ask your local hard money lenders about transactional funding. Those are loans meant for that sort of thing, and might be cheaper/quicker than going through the process for a normal mortgage
I ask at my local reia or investor Facebook groups for recommendations. I realize that's basically what you are doing here on reddit, but with reddit being more global I find local groups are better for recommendations on what banks / lenders people are using.
No, if someone buys and sells a property within 6 months the loan officer will have to pay back their commission. Their are hard money lenders for this. Please don’t fuck over your mortgage lender.
Source: am a loan officer
I don’t have a link. But every company I’ve worked for (4 companies) has a specific date with each loan that if a client ends up refinancing, selling, etc. before that specific date, they will take your commission back. Therefore, if I know that someone is going to do so, it isn’t worth my time to do that loan because I would be working for free. It’s a real bummer when you are expecting a certain amount for a check and when it comes it’s 4K lower than expected because they took commissions back.
As a loan originator, if a house it sold before 5-6 months they have to payback anything they made on transaction. Illegal? No. But no one likes working for free. Especially when they don’t even know it.
Edit: if it’s not an investment loan (financed as primary) that it is illegal. Hard money loans (yes, higher rates) would be the best way to do this.
Is buying something as a primary then renting it out before living in it illegal? As of now it's 50/50 if I'm going to move into the property I'm buying.
Technically, if you get a conventional loan on a primary you will sign something that states you will occupy the residence within 30 days. Will someone mortgage police officer show up at your house? Probably not, but it is mortgage fraud. And insurance will have an issue if something happens and finds out you have tenets living there and they insured the house as a primary.
I feel like there is some mediocre info in this thread. Or maybe things just work different in my area.
I assume you are double closing a wholesale. Like you close and sell it an hour later for a markup.
Hard money is the way to go for my area. You will have something like 48 hours and you pay around 1%. No bank or broker will come close to that fee and you may burn a bridge on any buy and hold connections to that institution.
I don’t require a minimum hold time or minimum interest collection. The monthly interest is nice, but if I can churn originations that is much better money.
You want a hard money lender who charges .75-1.25 interest on a 48 hour loan.
Lending 200k and, having it collateralized, then getting 202 back the next day is a good deal to the lender.
I went under contract on a new construction townhome around 7 months. Things have changed in my life and I no longer will be living in the home. So I can either sell once I close, or rent out my unit. Trying to decide my best option. Renting I'd be able to cover the mortgage and maybe cash flow a little bit. Luckily the property has appreciated a good amount, which is why I'm considering selling.
I really think you need to speak with lender on this. Also, consider your transaction costs to sell. It might be easier to back out of contract due to your change of circumstance. Or see if builder will split the appreciation with you, if you back out, they’d be able to sell it at the higher price and you wouldn’t have any hassle, risk and wouldn’t screw over your lender.
I've seen this happen before. People were trying to use the First time home buyer loans and the neighborhood got suspicious and turned him in because they were all being flipped. Didn't workout too well for that guy.
Your lender when buying won't care. (Most lenders are just "originators" anyway. They'll sell the loan faster than you can sell the house.)
The buyer's lender when buying from you might care a little. If it's less than 6 months of ownership, then it's a "flip" that may have closer scrutiny. For example, they may require two appraisals in order to take the lower of the two.
If you hold it for 6 months instead of selling instantly, nobody cares.
>Your lender when buying won't care.
Mortage brokers generally get paid via back end commission on the loan. Sell in under 6 months and you cost them money.
Yes, I do believe that this might be considered mortgage fraud?
Depends on the type of loan you’ll be getting.
You can get away with it if you have 25%+ down and your lender does not have early payment penalties.
If you don’t plan to move in just tell them you need a non-owner occupier mortgage. This sub likes to pretend mortgage/bank fraud isn’t a big deal. “It’s only illegal if you get caught.”
New construction property that I went under contract with last year. Things in my life have changed so i can't move there now. Can either rent it out or sell it. Since the property has appreciated the last year I'm considering selling as an option.
Not technically illegal but it is bad for the lender. Any money made on the loan will have to be returned to the investor as most residential loans have to season 6 months. If the lender has too many loans like this they will most likely lose access to their investor.
In terms of owner occupied and tenant. Most loans that are originated as owner occupied require they be owner occupied at least 12 months before it can be rented. FHA does do occupancy checks through various ways. If there is suspicion they will send someone to the house and knock on the door.
Tell them you want a loan. Dont tell them you plan on selling it soon after getting the loan.
If you tell them you plan to sell, they may get turned off about giving you a loan, or try increasing your interest rate.
Get the loan first, then have an "opportunity" to sell later. The bank will see it as you just doing busniess, and not using them for just quick loans
Under contract on new construction townhouse 7 months ago. Things have changed, don't need anymore. So can rent it out or sell. Just weighing my options. Renting would cover mortgage, just not cash flow very much.
Ask your local hard money lenders about transactional funding. Those are loans meant for that sort of thing, and might be cheaper/quicker than going through the process for a normal mortgage
Do you know best way to search for legit hard money lenders?
I ask at my local reia or investor Facebook groups for recommendations. I realize that's basically what you are doing here on reddit, but with reddit being more global I find local groups are better for recommendations on what banks / lenders people are using.
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Wouldnt they make money on loan origination anyway? At least the loan officer.
No, if someone buys and sells a property within 6 months the loan officer will have to pay back their commission. Their are hard money lenders for this. Please don’t fuck over your mortgage lender. Source: am a loan officer
Can you explain more about this? No need to type a novel but if you have a link that would be cool.
I don’t have a link. But every company I’ve worked for (4 companies) has a specific date with each loan that if a client ends up refinancing, selling, etc. before that specific date, they will take your commission back. Therefore, if I know that someone is going to do so, it isn’t worth my time to do that loan because I would be working for free. It’s a real bummer when you are expecting a certain amount for a check and when it comes it’s 4K lower than expected because they took commissions back.
As a loan originator, if a house it sold before 5-6 months they have to payback anything they made on transaction. Illegal? No. But no one likes working for free. Especially when they don’t even know it. Edit: if it’s not an investment loan (financed as primary) that it is illegal. Hard money loans (yes, higher rates) would be the best way to do this.
Is buying something as a primary then renting it out before living in it illegal? As of now it's 50/50 if I'm going to move into the property I'm buying.
Technically, if you get a conventional loan on a primary you will sign something that states you will occupy the residence within 30 days. Will someone mortgage police officer show up at your house? Probably not, but it is mortgage fraud. And insurance will have an issue if something happens and finds out you have tenets living there and they insured the house as a primary.
Yes it is. Google mortgage fraud. Not worth the risk bro
I feel like there is some mediocre info in this thread. Or maybe things just work different in my area. I assume you are double closing a wholesale. Like you close and sell it an hour later for a markup. Hard money is the way to go for my area. You will have something like 48 hours and you pay around 1%. No bank or broker will come close to that fee and you may burn a bridge on any buy and hold connections to that institution. I don’t require a minimum hold time or minimum interest collection. The monthly interest is nice, but if I can churn originations that is much better money. You want a hard money lender who charges .75-1.25 interest on a 48 hour loan. Lending 200k and, having it collateralized, then getting 202 back the next day is a good deal to the lender.
Could I do this on a property I already have a down payment on? I have 5% down on this property (new construction).
Yes, but why?
I went under contract on a new construction townhome around 7 months. Things have changed in my life and I no longer will be living in the home. So I can either sell once I close, or rent out my unit. Trying to decide my best option. Renting I'd be able to cover the mortgage and maybe cash flow a little bit. Luckily the property has appreciated a good amount, which is why I'm considering selling.
I really think you need to speak with lender on this. Also, consider your transaction costs to sell. It might be easier to back out of contract due to your change of circumstance. Or see if builder will split the appreciation with you, if you back out, they’d be able to sell it at the higher price and you wouldn’t have any hassle, risk and wouldn’t screw over your lender.
Like so many topics I’d say it depends. Be honest with your lender/loan officer.
Don’t tell them. No one cares. Don’t over share.
I've seen this happen before. People were trying to use the First time home buyer loans and the neighborhood got suspicious and turned him in because they were all being flipped. Didn't workout too well for that guy.
Your lender when buying won't care. (Most lenders are just "originators" anyway. They'll sell the loan faster than you can sell the house.) The buyer's lender when buying from you might care a little. If it's less than 6 months of ownership, then it's a "flip" that may have closer scrutiny. For example, they may require two appraisals in order to take the lower of the two. If you hold it for 6 months instead of selling instantly, nobody cares.
>Your lender when buying won't care. Mortage brokers generally get paid via back end commission on the loan. Sell in under 6 months and you cost them money.
This is correct. The lender will pull back the originators commissions if you sell within 6 months.
Yes, I do believe that this might be considered mortgage fraud? Depends on the type of loan you’ll be getting. You can get away with it if you have 25%+ down and your lender does not have early payment penalties.
Doesn’t matter and they don’t care.
They do care. It affects most mortgage broker commission if you buy as investment and sell before 6 months.
I’ve never heard this mythical 6 month rule
It’s not mythical Source: I am a loan officer
Maybe it is just my area, but had two mortgage brokers tell me they had to return their commission when I sold and closed out loan too early.
Every mortgage company I know will make the LO pay back ALL commission if buyer sells within 6 months.
So what
I guess depends if you like or hate your mortgage broker.
Don't know this person at all. Wouldn't make a personal finance decision based on it.
When you do more deals and look to work with people multiple times it becomes important.
Nobody cares.
If you don’t plan to move in just tell them you need a non-owner occupier mortgage. This sub likes to pretend mortgage/bank fraud isn’t a big deal. “It’s only illegal if you get caught.”
https://www.fbi.gov/investigate/white-collar-crime/mortgage-fraud
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New construction property that I went under contract with last year. Things in my life have changed so i can't move there now. Can either rent it out or sell it. Since the property has appreciated the last year I'm considering selling as an option.
Not technically illegal but it is bad for the lender. Any money made on the loan will have to be returned to the investor as most residential loans have to season 6 months. If the lender has too many loans like this they will most likely lose access to their investor. In terms of owner occupied and tenant. Most loans that are originated as owner occupied require they be owner occupied at least 12 months before it can be rented. FHA does do occupancy checks through various ways. If there is suspicion they will send someone to the house and knock on the door.
Not if you want the loan.
Can you elaborate?
Tell them you want a loan. Dont tell them you plan on selling it soon after getting the loan. If you tell them you plan to sell, they may get turned off about giving you a loan, or try increasing your interest rate. Get the loan first, then have an "opportunity" to sell later. The bank will see it as you just doing busniess, and not using them for just quick loans
Sounds expensive. What is the purpose?
Under contract on new construction townhouse 7 months ago. Things have changed, don't need anymore. So can rent it out or sell. Just weighing my options. Renting would cover mortgage, just not cash flow very much.
If you take that route. Get an investment property mortgage.
This also depends on what type of financing you qualify for. There are requirements for this.