Regarding That Owner-occupied Post...
To rajwarrior, and anyone else who may have somehow been offended by my reqest for information...
My apologies. As it is a 'beginner's forum,' I would think that no question would be a stupid one. I am, after all, just beginning, and still trying to figure out what things mean.
First off, I should've been more specific: I was thinking owner-occ financing was the way to go for me, NOT because it's cheaper financially, but because I'm going stated income at this time (because of self-employment). I've been told I might not be able to GET non-owner-occupied financing, having only a 10% gifted down payment and virtually no assets to put against it (besides the house itself). Again, should've posted that...but my ego kinda got in the way there. Hate to point out to someone that you're about to embark on this big journey as a beginner real estate investor, but that you're not exactly the most stable-looking financial person income-wise to a bank, despite a 759 credit rating. Pride sucks. I'll do my best not to let it distort the situation again.
That being said, keep in mind here that I'm not trying to argue for the practice...not trying to ask for "help" with "unethical practices," which incidentally I didn't say I intended to do, but rather wanted to get information to see if it WAS a big 'no'... I'm just trying to show you how my confusion arose. Please keep that in mind before you jump back down my throat and decide to call me worse things than 'unethical:'
I've heard of several landlords living in a place for 5-10 years, then moving into another rental property and keepingt the first without refinancing it. Is THAT 'unethical'? If OO is only for someone who intends to reside in a place permanently, how does anyone move out of their SFR and keep it as a rental without refi'ing into a non-owner-occupied loan?
Again, I'm just looking for clarification. Just trying to understand the way things work. As I've surfed this board for quite some time, I've been very impressed by how supportive the posters were, especially for those of us just trying to get into it, and despite some questions that even I thought were stupid. I'm hoping for the same tolerance for my questions. Before you jump down my throat, I wish you'd keep in mind that I'm a beginner, posting to a beginner's forum, looking for information. That's why I ASKED the question...so I wouldn't make the mistake of doing the wrong thing.
While we're clarifying our posts, I'll point out that YOU were the first one to mention that it wasn't ethical, so please don't try to sound like you had no idea that it wasn't.
It is a big NO, to try to finance every property with a owner occuppied loan. I think I made that clear in my response to you other post. When I said "permanently", I meant with the intention to live there permanently. IF you're looking at 2 properties, you clearly have no intention of living in at least one of them, correct? Saying, "i intended to live in this one until I saw that one, but I wanted both" doesn't fly from a moral standpoint, and probably not from a legal standpoint either should the lender investigate it.
There's a big difference from someone living in a place 5-10 years and then converting to a rental as opposed to someone living in a place a month or less, or worse, not at all.
With a 759 credit score, you should have brokers lining up to loan you money. If you don't, you need to find a better broker because, with that score, you should be able to borrow 90-95% of the purchase price thru a No-Doc or stated loan program, fairly easy. You shouldn't need any other asset but the property you're buying anyway.
There are several other ways to finance properties without credit checks. Hard money lenders, private lenders, and subject to buying are just some. My personal favorite is what I call a "delayed payment" plan. Have the seller agree to hold a note for 60-90 days. At closing, you take title, he gets a note for the balance. You immediately refinance the property and payoff the seller.
This has several pluses. First, normally, you'll offer the seller a little more for the added "risk" that he is taking. Second, you get the property "no money down." Third, a refinance is usually easier to get than a purchase loan, Fourth, depending on equity, you may be able to do a cashout refi.
Roger
I would have to say there are many rental properties out there that were obtained via owner occupied mortgages originally. This is how alot if not most people start into the rental business. They move up or get relocated and keep the original house as rental property. I don't think there is anything unethical about it. From reading your earlier post, it sounds as if you want to do this repeatedly. What you will find out is that once you own your first property, anything after that usually does not fall into "owner occupied" financing. The second one can be purchased as a "second home" probably if its a SFR (not a duplex, triplex, etc) and a correct amount of distance from the first home, but banks and mortgage companies won't repeatedly loan as "owner occupied" if you own other properties, they see anything else as investments, hence higher down payments and interest rates because the loans are higher risks. Just my two cents.
Thanks, y'all. From re-reading my earlier post, I suppose it does seem as if this is something I wanted to do repeatedly.
And to be honest, the thought had crossed my mind...but again, knew it wasn't ethical, which is why I posted the request for info. I was more looking for a way to make one or both of these work (and also trying to understand a bit more about owner-occupied financing. Like you said, John, it would seem that many investors get their start renting out their first house after they've moved. But if they do that--having lived in house #1 for, say, 10 years--do they not get owner-occupied financing on their new house?).
(In case you can't tell, I've been researching everything from deeds to property values for a little while, and am pretty solid on the buying-and-selling part...but this is the first time I've gotten this close to dealing with financing).
Regardless, much thanks for the info, y'all. Again, I certainly don't want to defraud anyone. But I definitely want to understand the way things work, so I don't find myself on the wrong side of the fence.
Its been my experiance that if you have an existing mortgage(home loan), any additional loans will be considered a second home or investment property. If on the chance I am wrong on this, maybe someone else could correct me.