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Can You Have Two Owner-Occupied Homes?

Can You Have Two Owner-Occupied Homes? | JMJ Funding


A second property can be an attractive option for an extensive list of reasons. From a vacation home for weekend getaways, to a brick and mortar space for business, or a second home where one is not the primary resident, there are many reasons to seek a loan for a second home. Expanding your real estate portfolio can be an attractive option for homebuyers, especially when benefitting from the advantages of an owner-occupied property. However, it is important to understand the restrictions of this kind of loan option, and why it’s important to abide by the rules when buying more than one property. Serious consequences can occur if you do not follow the guidelines outlined for owner-occupied properties. 


Guidelines for an Owner-Occupied Home: 


For those who are already the beneficiary of an owner-occupied loan, you are most likely already privy to the benefits of this loan form. For example, you know that as a primary residence, it may qualify for a property tax deduction. Along with this, as a FHA backed loan it can be easier to find an investor, and credit scores may be lower than other forms of loans. These, among other benefits, are reasons you may seek another owner-occupied loan when looking for funding for a second property.


However, an owner-occupied loan requires the property to be the primary residence of the borrower. This looks like residing in the property 70% of the time, working within a 50-mile radius, and being the primary occupant of the property. Vacation properties, second homes, or homes granted in a will do not qualify for owner-occupied properties. 


Mortgage Fraud: Know to Avoid


If you are looking to finance a second property, whether as a business or private venture, owner-occupied may seem like an attractive option. However, intentionally pursuing an owner-occupied loan for a property in which you are not the primary residence is considered occupancy fraud. 


What matters when applying for an owner-occupied loan is the intent at the time of signing. If a buyer knowingly deceives investors by securing a loan when it is not a primary residence is occupancy fraud. If you do sign with the intent on making the property your primary residence, but life circumstances denote living in the property for the often 12-month time period, making sure to communicate with the lender is an important move.


What Can Happen with Occupancy Fraud?


Occupancy fraud, or mortgage fraud where you deceive lenders regarding your primary residence, can result in immediate loan withdrawal and thus foreclosure on the property. If this is a pattern for borrowers, this may result in an investigation from the FBI. If legitimate intent to deceive is found, this often results in legal action such as fines, and often means it is nearly impossible to secure another owner-occupied loan in the future.  


Alternative Financing Options for Second Properties


To avoid occupancy fraud while still making the smart move to expand your portfolio, whether in the form of a second home or business venture, there are other means to secure another property.


    1. Cash: While it may be difficult, if you are able to save, making an all-cash purchase is the easiest way to secure the second property.
  • Home Equity Loan: While a possibility, be prepared to show a higher credit score, along with paying more upfront. Lenders will look especially at the LTV or loan-to-value ratio when deciding whether to invest. This is a feasible option for those who have a good payment history.
  • Hard Money Loan: Hard money loans are a quick, easy way to raise capital when looking to invest in a property. Unlike other loans, which take your financial trustworthiness into account, hard money loans rely on property collateral, rather than creditworthiness. Hard money loans are great ways to free up cash flow for investment properties or flipping houses, and allow the borrower to allocate the money how they see fit. Hard money loans are not lent through banks, so borrowers rely on individuals and companies to lend money for their investments. Learning more about the process of hard money loans is a great way to start if you are looking for a quick and easy way to free capital for other real estate investments.

Bottom Line: 

Continuing to invest in properties and expanding your portfolio comes with risks and challenges, but is certainly rewarding and sometimes even necessary. When it comes to the investment of second properties, one of the most important things you can do is find a financial advisor who can help you through the process. JMJ Funding is private lending, simplified, and can be your next best move in securing a second property.

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