Refinancing after 6 months on 30yr FHA (options)? 2016 July rates DROPPED v LOW

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dream16

New member
Guys, thanks to brexit, now the interest rates are nearing to an all time low.

Please answer the questions:

1. Considering its the first home purchase, If the home-owner is no longer living in the mortgaged house that he got as a primary residence and have rented it out, will the bank create issues in refinancing?

2. Does the home-owner get the option to move to a different bank or some other lender (considering he has completed 6 months with the original lender) for refinancing in case the original lender starts dictating the law of "intent of the homeowner to live in the primary residence for which the loan was issued" ? The legal stuff i have heard on this word "intent" is: that people can intent for many things but does not necessarily mean they will do what they intended to. This might constitute apparently as a fraud or whatever you want to call it in the books of mortgage but the average Joe has already been making monthly mortgages on time and just needs a lower APR now.

Anyways long story short, if the home owner wants to get refinanced at 3.1 (lowered from a 3.8 ), i strongly believe its worth all the hassle to get it one way or the other.

Any feedback or experienced advice will be greatly appreciated. Thanks again guys, happy refinancing :)
 
If the property you are refinancing is currently a rental, the bank will sell you a non-owner occupied loan, which is usually a bit higher than an owner occupied loan.

The originating lender generally does not come back to "check" to see if a home is owner occupied. It only comes up during refinance.
 
best_potsticker_in_town said:
If the property you are refinancing is currently a rental, the bank will sell you a non-owner occupied loan, which is usually a bit higher than an owner occupied loan.

The originating lender generally does not come back to "check" to see if a home is owner occupied. It only comes up during refinance.
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Thanks for the info, is it a standard norm on all refinancing? I mean even if the home-owner switches and moves to a new lender? And also how big is the difference b/w non-owner vs owner occupied loan rates? And if in this case, the owner is able to get refinancing done through the same lender - will the same lender make a home visit to check? Ahh :(
 
When you refi and select primary residence when it's not = mortgage fraud and felony.  Misdemeanor if small amount.
 
dream16 said:
best_potsticker_in_town said:
If the property you are refinancing is currently a rental, the bank will sell you a non-owner occupied loan, which is usually a bit higher than an owner occupied loan.

The originating lender generally does not come back to "check" to see if a home is owner occupied. It only comes up during refinance.
Click to expand...

Thanks for the info, is it a standard norm on all refinancing? I mean even if the home-owner switches and moves to a new lender? And also how big is the difference b/w non-owner vs owner occupied loan rates? And if in this case, the owner is able to get refinancing done through the same lender - will the same lender make a home visit to check? Ahh :(
Click to expand...

Anytime you refi, whether it's through the existing lender or not, you are essentially applying for a new loan. This means submitting a brand new application, running credit, a home appraisal, etc. During this process, they will ask you if the property is owner occupied. Depends on the bank, but non-owner occupied loans can be anywhere from .25% to .5% more.
 
Non-Owner loan to values are 75% LTV and lower for best pricing.

You'll have to document the rent you receive. Paid in cash? Sorry, thanks for playing. Get 6 months of cancelled checks or inbound wires and you're golden.

First, it's about .25 or more between purchase financing (3.25% example) and refinance rates (3.50% example). Then it's .375 to .50 higher for Non-Owner. (3.5 becomes 3.875 for example)

Currently there is a big spread between purchase and refinance rates. The easiest tool to document this is Wells Fargo's on-line rate portal. Swap between purchase and refinance and you'll see the difference. In a few cases the rate doesn't change, but the APR does - meaning higher fees for that rate.

https://www.wellsfargo.com/mortgage/rates/

My .02c

Soylent Green Is People.
 
Are there any cases where people get prosecuted for getting an owner occupied loan, but in reality was an investment property if payments are always made?  There was so much fraud in the past few years during the short sales bonanza and I never heard of anyone getting in trouble for that.  Seems like they would be higher on the list to get prosecuted vs. someone who is making on-time payments to an incorrectly classified loan.
 
woodburyowner said:
Are there any cases where people get prosecuted for getting an owner occupied loan, but in reality was an investment property if payments are always made?  There was so much fraud in the past few years during the short sales bonanza and I never heard of anyone getting in trouble for that.  Seems like they would be higher on the list to get prosecuted vs. someone who is making on-time payments to an incorrectly classified loan.
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Good Question which raises 2 more additional questions:

1. If lenders or banks are really so worried about lending a 30 yr FHA (with 20% down) to a home-owner who initially lives in the property for 5 months and then rents it out, why don't they strictly do periodic physical site inspection checks? I bet the reason lies with the fact that these same lenders/banks needs qualified/excellent candidates with 760+ credit scores in the first place but just for the heck of following the so-called freddie/fannie guidelines/laws on paper: they don't do any actual site checks

2. For refinancing, i am guessing that since bank does NOT gain anything (unless charge high closing costs + misc fee + higher APR with low interest rate) from giving a home-owner turned landlord a lowered interest rate - why would they prioritize it? Secondly, what is in it for them to do actually do a physical site check to see whose occupying it? It might make sense to do it for investors or lets say folks with multiple houses, but for anyone who just bought something, they should let those folks breathe and i guess, i have never heard anyone till date being prosecuted for lying about their intent.

3. How many folks here would make that phone call to the bank saying: hey guys, thanks for refinancing me in the 7th month now, but i found a new job and moving, so please raise my interest rates....would you be doing that? OR how many homeowners actually had someone show up at the door from the lender asking about whose living in the property during or after the refinancing process?

I am not saying do the wrong thing or lie, cheat and steal, but so far none of these refinancing clauses make any sense for someone (well qualified etc.) very new on the mortgage boat.
 
My take on it is that the lower rates for primary is because that's how they'll treat the property, with care. A renter, not so much. And if you're upside down, a lot of primary would stick around, investment properties, less so.  So the higher rates are built in for the risk.
And since its their money and lending it out, they'd care for it a heck a lot more.
 
https://www.washingtonpost.com/real...2dcff0-1e6b-11e5-aeb9-a411a84c9d55_story.html

We had a "door knocker" who came by when we lived in Tustin Ranch but it wasn't the lender, it was the insurance company. I think we had 20th century at the time. They sent us a cancellation letter stating that they only were insuring owner occupied and since it was "obvious" we weren't living there.......... despite the fact that I was in the downstairs bedroom and saw the guy peering thru the windows and he saw me!

When I called to complain they said it was because we had no window coverings on the downstairs windows.......... hello! We were only there a couple weeks!

Our current house had to have an inspection by AAA before they would insure us and the woman who came was clearly trying to determine if it was owner occupied. She didn't come for two months after we lived here! Luckily we had no claims to file but they claimed that we were covered since we told them we were moving.

Oddly, even though we notified AAA that we sold our previous home and were moving and needed a new home insurance policy and gave them the address they never changed the address on the auto policy which was linked to the home policy. Several months after we were here we got a check in the mail because our auto policy premiums dropped for the new address and they specifically stated they were applying the change to the address the post office delivers our mail to, not the address for our home insurance.

And yeah............. auto insurance went DOWN without any change to the policy other than moving from super duper gated safe Irvine to ghetto TL with no gate. Go figure.

 
Ready2Downsize said:
https://www.washingtonpost.com/real...2dcff0-1e6b-11e5-aeb9-a411a84c9d55_story.html

We had a "door knocker" who came by when we lived in Tustin Ranch but it wasn't the lender, it was the insurance company. I think we had 20th century at the time. They sent us a cancellation letter stating that they only were insuring owner occupied and since it was "obvious" we weren't living there.......... despite the fact that I was in the downstairs bedroom and saw the guy peering thru the windows and he saw me!

When I called to complain they said it was because we had no window coverings on the downstairs windows.......... hello! We were only there a couple weeks!

Our current house had to have an inspection by AAA before they would insure us and the woman who came was clearly trying to determine if it was owner occupied. She didn't come for two months after we lived here! Luckily we had no claims to file but they claimed that we were covered since we told them we were moving.

Oddly, even though we notified AAA that we sold our previous home and were moving and needed a new home insurance policy and gave them the address they never changed the address on the auto policy which was linked to the home policy. Several months after we were here we got a check in the mail because our auto policy premiums dropped for the new address and they specifically stated they were applying the change to the address the post office delivers our mail to, not the address for our home insurance.

And yeah............. auto insurance went DOWN without any change to the policy other than moving from super duper gated safe Irvine to ghetto TL with no gate. Go figure.
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Sounds like a paid article to scare the general public but either-ways, there's no data or reports that seems to testify the fact of asking for immediate full loan payments or this FBI thingy (jail and what not). Anyways, the worst i can see happening is the lender raising the interest rate and continue to suck home owners blood till he fully pays out.

And if the homeowner is not lying to the insurance company and has clearly stated that it is now a rental property and have purchased the rental property insurance, there should not be any door knocking or spying of any sorts and i don't know what if any sort of actual communication happens between the home insurance seller and the lender? Or as per the article - the post office and the lender?
 
There are "door knockers", insurance tips, HOA data, 4506-T filings and other means that a lender can find out if the purchase was owner occupied, but in reality became a rental property a mere 2 weeks after close of escrow. When you sign your closing documents, you also sign an "errors and omissions" document that allows the lender to re-check data or correct information that might not fit what a post closing audit finds. So.... you get caught... what's next?

1) The lender may have to buy the loan back. If you went through a small shop to get your loan, 1-2 buy backs and the lender is going kaput.

2) You may be gently encouraged by the lender to refinance with another company.

3) Nothing may happen because you were relocated 20 miles away (rare, but it does occur)

4) Worst case scenario is that the note is accelerated and you have to refinance or pay off/sell. This also is very rare.

Honestly, if you're going to run the risk of this happening for .25% to .50% in interest costs, I have to question your priorities. Sure it's more expensive to structure a non-owner deal. Sure also, it beats having to worry about the worst case alternatives if the right thing is done from the get go. As soon as someone says "it won't happen to me..." it's pretty much a given that the knock on your door will occur sooner than expected.

My .02c

SGIP
 
Our insurance company was alerted to our new address thru the post office. Not sure if something was returned to them that was addressed to our old house or how they found out.

I didn't really care since we had moved. I was a little irritated that we didn't get our insurance prorated from the time we moved since they really should have known we moved when we told them we needed new home insurance and cancelled our old one. The date the new rate was effective was the date they found out thru the post office. Not worth my time to call and get the extra cash.

 
I think the bottom line is...fair or not...you won't be able to get past the bank regarding owner occupied vs. non-owner occupied. The bank can easily tell just by looking at bank statements, addresses on paystubs/W2's/tax returns, and sometimes they even ask for utility bills. Whether all this makes sense or not doesn't really matter. If you're in the market for a mortgage, you have to play by the rules as defined by the banks/HUD/FHA/etc.
 
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