Why do mortgage companies verify occupancy? Mortgage companies will verify occupancy because mortgage fraud is a fairly common practice for those looking to avoid the high interest rates of investment properties. Moreover, occupancy can affect the appraised value of the property.
Does a mortgage broker check for occupancy?
Does a Mortgage Broker Check for Occupancy? Who Owns the Deed of Trust? A mortgage broker's responsibility to the borrower stops when the loan closes. Under no circumstances does the mortgage broker have to verify that the homeowner moved into a primary residence.
Why confirm borrower occupancy?
But those who also understand what steps are taken to confirm borrower occupancy are at an advantage. When you and your customers know what’s expected, you can anticipate and address any potential red flags before loan files are delivered to underwriting.
How long does a mortgage company monitor owner occupancy?
Some loans, such as those backed by Fannie Mae and Freddie Mac require a 12-month owner occupancy clause in the mortgage documents, which means after 12 months, they will not monitor your occupancy status. Other loans, such as the VA loan, require owner occupancy for the duration of the loan.
What is owner occupancy on a mortgage?
Owner occupancy basically means that you or at least one of the signing borrowers on the mortgage are going to occupy the property full-time. Some loans, such as those backed by Fannie Mae and Freddie Mac require a 12-month owner occupancy clause in the mortgage documents, which means after 12 months, they will not monitor your occupancy status.
What does a mortgage broker do if a borrower doesn't qualify for a loan?
If the borrower doesn't qualify for a loan, the mortgage broker assumes the role of a counselor and advises the consumer on ways to improve credit scores and reduce debt.
What is the role of a mortgage broker?
Duties. A mortgage broker acts as an intermediary between a consumer and a lender. The broker doesn't fund a loan. Instead, his role is limited to finding the most suitable mortgage program for the borrower. The broker will collect the required supporting documents and submit the completed loan application to the most appropriate lender.
What happens if you don't live in your home during the first year of ownership?
If the lender determines the homeowner isn't living in the primary residence during the first year of ownership, the owner will likely suffer some type of penalty. In this case, the lender may increase the interest rate or accelerate the loan payoff and require that the entire balance is due immediately.
How long do you have to move in after closing?
Lenders usually stipulate that homeowners have 30 days after closing to occupy a primary residence. To verify the person moving in is actually the owner, the lender may call the house and ask to speak to the homeowner. A tenant is likely to respond that the owner lives elsewhere.
Does a mortgage broker have to verify if a borrower moved into a primary residence?
A mortgage broker's responsibility to the borrower stops when the loan closes. Under no circumstances does the mortgage broker have to verify that the homeowner moved into a primary residence. However, the lender often follows up and checks to see who actually moves into the house.
Is an investment property a primary home?
An investment property may cost the borrower a whole percentage point more in interest. Consequently, borrowers are tempted to lie on the mortgage application and state that an investment property will be their primary home.
Who is Pat O'Connor?
Pat O'Connor is the broker/owner of The Veritas Real Estate Group in Coral Springs, Fla . She holds a M.A. in psychology from the University of South Carolina. O'Connor has been writing real estate and loan origination textbooks, as well as developing online courses, since 2005.
What does owner occupancy mean on a mortgage?
Owner occupancy basically means that you or at least one of the signing borrowers on the mortgage are going to occupy the property full-time. Some loans, such as those backed by Fannie Mae and Freddie Mac require a 12-month owner occupancy clause in the mortgage documents, which means after 12 months, they will not monitor your occupancy status. ...
Why is owner occupancy important?
Owner occupancy is important to banks, which is why they offer lower interest rates and more favorable terms for owner occupied loans. It is much tougher to obtain non-owner occupied loans today, simply because too many banks got burned by investors that were flipping homes.
What does a lender check on?
Lenders have ways of checking up on owners, including drive-by evaluations, checking on your homeowners insurance to see if renter’s insurance has been taken out as well as checking your property taxes to see if any discounts have been applied for the property being owner occupied.
What happens if you lie on closing documents?
The documents that you sign at closing are upheld by the law, which means that there could be serious consequences if you lie on the application. Many people also think that the lenders will never know if the property is not owner occupied – but they do.
Do lenders give loans to primary residences?
Lenders are more likely to provide loans to borrowers that are looking for a primary residence. There is something to be said about taking care of the home that you live in rather than the home that you lease out to others. You are more likely to let go of your investment property should your finances become restricted. Your primary home, however, you will likely fight to keep, no matter how tough things might get.
Can you change your plans at closing?
You might think that you can sign your mortgage papers agreeing to occupy the property, but once you walk away from the closing that you can change your plans. This is not true and certainly not recommended. The documents that you sign at closing are upheld by the law, which means that there could be serious consequences if you lie on the application. Many people also think that the lenders will never know if the property is not owner occupied – but they do. Lenders have ways of checking up on owners, including drive-by evaluations, checking on your homeowners insurance to see if renter’s insurance has been taken out as well as checking your property taxes to see if any discounts have been applied for the property being owner occupied.
Can you move out of a home if you remodel it?
If the remodeling will make it impossible to occupy the home safely, you might be allowed to move out for the time that it takes to make the home safe to live in, but do not make that assumption. It is always best to talk to your lender about your plans before making them.
What is mortgage broker?
Mortgage brokers aim to provide borrowers with competitive financing terms. Whether loans are needed for owner-occupied properties or for investment properties, a mortgage broker relies on a trusted network of lenders to fulfill a borrower's financing request. A mortgage broker checks each loan file for completeness, before a borrower's loan documents are submitted for an investor's approval.
Why is preferential mortgage interest attractive?
Preferential financing is offered, because a borrower is more likely to pay for his primary home loan versus a mortgage loan for an investment property. A mortgage broker will verbally confirm ...
What is investment property loan?
Investment property loans are used to secure financing for rental properties. Investment property loans are associated with above average lending risks, and the loan costs are generally more expensive, too. A borrower could need a down payment for an investment property that represents several times the amount for a loan on a primary residence. The financial requirements might lead a borrower to choose financing for a primary residence, instead of the investment property option. A mortgage broker will not check a borrower's occupancy at an investment property.
What happens if you misrepresent a loan?
Fraudulent loan information or misrepresentations could lead to fines or jail time. Mortgage lenders use a variety of methods to determine whether a borrower's loan was unethically obtained. For example, mail delivery or exterior inspections may be conducted to determine if a borrower occupies a subject property.
What is secondary residence?
A secondary residence selection indicates a borrower's intent to reside within multiple dwellings. The investment property option informs the lender of the borrower's intent to rent the home. A mortgage broker will check the selected occupancy status, as the terms vary among loans for a primary residence, a secondary residence ...
Do you need a down payment for an investment property?
A borrower could need a down payment for an investment property that represents several times the amount for a loan on a primary residence. The financial requirements might lead a borrower to choose financing for a primary residence, instead of the investment property option. A mortgage broker will not check a borrower's occupancy ...
Who is Ray Cole?
Cole writes for eHow and "SF Gate.". As a small business owner for over 15 years, he provides mortgage services, credit-related help and financial planning for his clients. Cole is currently writing a book about personal finance.
What does an interior inspection do?
The interior inspection is a key part of the field inspector's job. If you've lost your home to foreclosure, or abandoned it before the foreclosure process is complete, your lender will take over possession of your residence and sell it on the open market. Before doing this, though, your lender will need to determine its condition so that it can either make necessary repairs or price the property properly. The field inspector can tell lenders the exact problems that a home is facing.
How often do you need a field inspector for a Fannie Mae loan?
Lenders will vary on how or if they use field inspectors in missed payment cases. If Fannie Mae owns or guarantees your loan, the field-inspector practice is far more regulated. In 2011, Fannie Mae revised its rules. Now, mortgage servicers working with Fannie Mae must order a property inspection within 45 days after homeowners miss a mortgage payment. The servicer must order property inspections every 30 days after this period until the homeowners pay up. In Fannie Mae cases, abandoned homes undergo a required interior inspection in addition to the external review. An interior inspection is allowed only in abandoned homes, however. You're not required to allow an inspector into your home if you're still living there.
What happens if you miss a mortgage payment?
When you miss a mortgage payment, your mortgage company will hire a field inspector to visit your home and determine if you still occupy it.
What happens if you leave your home behind?
If you're still living in your home, the inspector won't perform an interior search. But if you've left your home behind, that inspector has the legal right to search inside your home to verify that you have indeed left the property. You may also encounter a field inspector after filing a homeowners insurance claim.
Do you need a field inspector for a foreclosure?
Foreclosure isn't the only time that lenders rely on field inspectors. If lightning, wind or other natural disasters damage your home and you file a claim with your insurance company, your lender might send a field inspector out to verify the repairs. This is one way that mortgage lenders protect their interest in your home; remember, they have to take it over if you default on your mortgage payments. Lenders want to make sure, then, that the home repairs get done the right way.
Do you need an interior inspection for Fannie Mae?
In Fannie Mae cases, abandoned homes undergo a required interior inspection in addition to the external review. An interior inspection is allowed only in abandoned homes, however. You're not required to allow an inspector into your home if you're still living there.
Can a lender evict you from your home?
Your lender can then either proceed with foreclosure -- evicting you and your family from your home -- or try to work out a payment system that you can afford. This latter option would keep you and your family in your home. If the inspector determines that you have abandoned the house, he has the legal right to enter your home ...
What happens after a HECm loan closes?
After a HECM for Purchase loan closes, the lender must certify to the FHA that the borrowers have moved into the property within this timeframe . Some lenders, including Urban Financial Group, perform occupancy inspections after closing to verify that the borrower is living in the home before the file is sent to HUD for insurance.
What does the underwriter do after closing?
Therefore, the underwriter must use other research methods to confirm that the borrower will move into the property after closing. This may include determining the borrower’s reasons for moving, how many other properties the borrower owns and any businesses the borrower runs that may be far away from the new property.
What is HECM in real estate?
The Code of Federal Regulations (24 C.F.R. 206.39) requires that HECM borrowers live in the property that secures their loan as their principal residence —defined as “the dwelling where the mortgagor maintains his or her permanent place of abode and typically spends the majority of the calendar year.
What does an underwriter do?
The underwriter will also perform his or her own research through various third-party systems that provide confidence levels and predictive indicators to assist in confirming owner occupancy. This research is used in conjunction with all other documentation to create a more complete picture of the potential situation and minimize the likelihood of closing on a non-owner-occupied property. It is important to note that documentation is key and even if the borrower has a great story to justify any anomalies, actual documentation must be present and verifiable in order to move the loan forward.
How long does it take for HUD to file a loan if you don't move in?
If the borrower has not moved into the property within 60 days of closing , the lender cannot submit the file to HUD for insurance. At that point, the lender must work with the borrower to get them to move into the property, or begin default proceedings when all attempts to rectify the situation have been exhausted.
How long does it take to occupy a home after closing?
The HECM for Purchase program requires that the borrower occupy the property within 60 days after closing.
How often does a reverse mortgage servicer send a letter to the borrower?
During the life of the loan, the reverse mortgage servicer will monitor occupancy. Once per year, the servicer will send a letter to the borrower’s home, which the homeowner must sign and return to confirm they’re living at the property.
