Hey everyone, I’m looking to move from a two-family house to a three-family one that’s less than a mile away. Can I still qualify for a primary residence loan on the new property?
As an underwriter, I’d have questions about your intent. Moving to another multi-unit property that’s so close to your current one can be a red flag. Going from a 2-unit to a 3-unit, especially within a mile, makes it likely the lender will want to verify the occupancy.
@Lyle
What kind of documents would you need as an underwriter to approve this?
Hayden said:
@Lyle
What kind of documents would you need as an underwriter to approve this?
You’d probably need to provide a letter explaining why you’re moving to this property as your main residence. Is it larger or more updated? Also, they’d want to know your plans for your current property. Leasing out all units, including the one you’re vacating, could support your case, though they’ll look closely at any lease arrangement for your old unit.
Only your lender can give you a final answer since they’ll be the ones authorizing your loan. What’s your debt-to-income (DTI) ratio if you get approved for this new mortgage?
What’s the plan for your current place? Are you selling it, or planning to rent it out? Underwriters want to ensure you’re not buying a ‘primary residence’ with intentions to use it as an investment to get better terms. Are you going with a conventional loan, FHA, or something else? That will make a difference too.
@Oakley
I currently have a conventional loan and plan to get another one. I’m not selling my current place; I’ll be renting it out.
Hayden said:
@Oakley
I currently have a conventional loan and plan to get another one. I’m not selling my current place; I’ll be renting it out.
In that case, you’ll need a solid reason for moving within a year and turning your current home into a rental. Primary residence rates and terms aren’t designed for investment properties. You likely signed an agreement stating you’d live there for at least a year. Your lender and underwriter will need to see a convincing reason to approve this.
Hayden said:
@Oakley
I currently have a conventional loan and plan to get another one. I’m not selling my current place; I’ll be renting it out.
You might be better off waiting the full 12 months. Fannie Mae or Freddie Mac might push this to a ‘Second Home’ or ‘Investment’ classification, which comes with higher rates and requirements. You’d need at least 10% down, though 15% could be more realistic.
I wouldn’t approve a three-unit primary residence when you just bought a two-unit primary less than a year ago. It feels risky for potential occupancy fraud. These moves need to add up, and right now, this doesn’t quite make sense.
Switching primary residences too soon could actually put you in default on your first mortgage. The lender might call the loan due.