I've spoken to a few LOs who say it's not unusual for borrowers to tell their LO that their new home will be their principal residence
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Hello, LOs!
Summer is upon us, and people across the country are vaccinated and looking to finally get out of the house. Many are vacationing in Airbnbs and other short-term rentals.
So let's talk more broadly about mortgages and short-term rentals
I've spoken to a few LOs who say it's not unusual for borrowers to tell their LO/lender on the application that their new home will be their principal residence – which means they cannot use it as an investment property – but after closing they use it as a short-term rental.
Of course, declaring it as a principal residence means they have lower downpayment and credit requirements. A secondary home would require 10% down and could only be rented for up to 180 days a year. An investment property would require at least 15% down. Secondary and investment properties cannot be bought with a government loan, but I suspect plenty of homes on Airbnb's platform have FHA, VA or USDA mortgages attached to them.
Even though they're not permitted to do it, some borrowers must think, "This is my house – who would know? And who would care so long as I pay my mortgage?"
So, let me ask you, LOs: How often does this happen? What, if anything, do you do when you suspect a potential borrower may not treat the property in accordance with the loan stipulations? In general, I would love to hear your thoughts on the matter. Shoot me an email anonymously at jkleimann@housingwire.com.
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