Owner occupant clause?

ry1820 · Joined: 29 Feb 2008 Posts: 1 1.50 Dollars($)

I have a question I hope you can help me with. Three years ago, my wife and I purchased a small condominium. We refinanced it with alocal credit union 7 months ago. In December, we decided to rent out the condominium and purchase a single family house because my wife is pregnant. We moved in with her parents when we found a tenant for the
condo (1 month ago) so we would not have to coordinate finding a
tenant while purchasing a house.
We now found a house, have an accepted offer, and have signed the purchase and sales agreement .
I just found out today while searching through my paperwork for w-2s and things, that we have a 1 year owner occupied clause on the refi we did in August. And the mortgage broker is using the credit union we did the refi with.
What is going to happen to us?

jameshogg

Hi Ry,

Welcome to forums.

If there remains a clause that you'll have to occupy the property for at least 1 year after refinance, then you should stick to it or else the lender may call the loan due. You need to check out the loan docs and find out if they speak of any action to be taken by the lender in this case. By the way, can you tell me what exactly the clause states?I'd like to see it and then probably things would be more clearer.

As for what you should do now, check out the loan docs first and then talk to the broker as he is helping you get a loan from the same credit union with which you've refinanced right? With the help of the broker negotiate with the lender not to call the loan due and resolve the issue through some cash payment. I don't know whether this will work but that's what I can think of right now.

Thanks

Guest 0.10 Dollars($)

It basically says that we agree to occupy for at least 12 months or they may immediately call the loan due and/or they can raise the interest rate to match that of non owner occupied.

Samantha

Ok Ryan, since you have already signed on the Purchase and Sales agreement, and you don't want to move back from it, the only way is to accept higher rates as applicable for non-owner occupied properties. Are you ready for higher payments?

gmakerley · Posted: Mon Mar 03, 2008 8:46 am Post subject:

yes, i agree...it sure seems you will be subjected to the higher, non-owner occupied rate of interest. of course, you would be well-advised to state your case for moving. not every lender is thin-skinned and unmovable. you may just be able to maintain your more favorable interest rate by seeking their favor.

Guest 0.10 Dollars($)

What will happen? Nothing most likely? ...unless you walk into the lobby of the credit union and announce it or if you change your mailing address for the rented house to come to you. Technically, you can either have the note called due and or have your note modified to a NOO (Non Owner Occupied) loan rate. So it depends on how financially well off you are that can pay for morally right actions?

This is common. People buy a house, get another after awhile and rent the old one. I've been a Broker for 30 years and it happens all the time. If you do nothing, chances are nothing will happen. It's like paying your taxes... when in doubt about a deduction, some people wlll take the deduction and some people won't.

What's the worse that can happen...probably have the note called. OK so you refi and get another loan without that clause. This came from a credit union and they have a lot of their own rules... I doubt if you find that clause in the normal FANNIE MAE/FREDDIE MAC arena. There are buyback clauses that lenders be us Brokers up with... that's when a loan is refinaned within 90 days of closing. There are also Prepay Penalty loans where you are subject to 6 monts insterest if you pay it off in a certain time, usually 2 yrs. Owner occupied clauses are not common, so this must be a credit union clause? I don't know your locale but the last place I would go for a mortgage loan is a credit union. You can generally do better elsewhere.

Ed Boyd, WA licnese # 510LO34761

gmakerley · Posted: Mon Mar 03, 2008 10:33 am Post subject:

in response to your last comment, ed..."the last place i would go for a mortgage loan is a credit union" struck me funny.

truly, until sub-prime became fashionable, the last place you might go for a mortgage loan and obtain it with poor credit was a credit union. i can cite you at least 5 specific instances in which i, as a lending manager at a credit union, made mortgage loans to borrowers who couldnt have received similar service with a broker, a bank or a lender of any other stripe - especially when taking into account the interest rate.

credit unions are more forgiving than any other lending institution, including fha. people with sub-500 scores are currently obtaining loans at credit unions in my locale (connecticut), yet nobody else will touch them.

oh well...

as for the owner occupancy clause, i believe you are correct in saying that it is a credit union-specific thing, and more than likely, specific to that particular credit union. i also agree with your assessment of the overall situation...just had to chime in when you made that final comment.

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