First time home buyer: advice request on purchasing a property as a second home
My wife an I are looking to buy our first home which will be our primary residence. However, our loan officer is advising us to purchase as a second home.
The primary reason for this is that we will be moving away and transferring jobs at around the same time an underwriter will be looking at our finances. We are pretty good on paper with our current incomes and the idea is that this would make the process easier and quicker.
We would convert the home to a primary after the sale. Our finances are fine in regards to holding the home after the move.
Does this approach raise red flags for anyone?
A couple things we have questions about:
- Tax implications - short and long term
- We would be signing paperwork stating this is a second home - potential fraud problems?
- conversion costs - title, re-appraisal, other fees?
- Anything else?
Any advice is greatly appreciated!
Posted Jun 16, 2014, 1:43 PM UTC
47
I wouldn't lie at any point during the home purchase process. (This obviously is not a second home purchase) Let the paper tell your story, don't create a false story.
This whole thing makes your loan officer seem shady - your loan officer has every motivation to speed the sale process up and get it through underwriting as they don't get paid until after closing. Do what is best for you, not the loan officer.
Be mindful that changing jobs will affect how stable you look to underwriting. They may request copies of your offer letters as proof of income.
Thank you for the response! The way this has been presented is that this sort of thing is done quite a bit and is understood by all parties. However, it really does make me uncomfortable and I definitely see the motivation that he might have for quicker turn for pay on close.
This is a bit of a timing issue for us. We want to get set up with pre-approval so we can move quickly when the right place comes around. However, our current jobs are just a bit too far from where we want to buy for commuting an option (on paper). Getting settled in new jobs first would perhaps extend the approval process (waiting for first pay stubs, etc.) and also complicate things in terms of needing short term housing in the area if we haven't bought yet.
I have a few concerns based on what you have replied with, and what you initially seemed to have conveyed.
Do you already have a home you are starting the purchase process with? ie. You have already made an offer to buy and have a sales contract?
If the answer is no, then you're being urged to proceed in an unusual way. Preapproval will only tell you that you will be guaranteed (more or less) a certain interest rate and dollar limit for the mortgage for a set period of time.
If you don't even know what you're approved for, why is your loan officer looking at secondary purchase options? I wouldn't feel confident that he is working in your best interest.
Have you received an employment offer in the area you would like to purchase? If you have an accepted offer, you do not have to wait for paystubs. You will have received an offer letter from the hiring company stating what compensation you will receive. This is enough for underwriting to use for salary information.
If you do not have employment already in this new area DO NOT PROCEED any further with your purchase process. There are no guarantees except that your sales contract will be executed and you might lose all of your earnest money if you fail to purchase due to lack of employment/income. Employment first, then you can relocate. Not the other way around.
I would find a new loan officer. I have used a mortgage broker whenever I bought a home, they shop more loan opportunities than a bank loan officer and often have better rates and more flexible fees/closing costs.