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No further clarification is necessary. It is clear what your situation is and it is clear what you should do about it. You should tell the lender that you are refinancing with that you currently occupy the home as your primary residence; but have contracted to purchase another home; and if that goes through you will turn the current home you live in into an investment property. They will tell you if they can continue with the loan as is or if they need to modify the underwiting and/or the interest rate. This has nothing to do with locking or pulling credit on the new home you intend to purchase as your primary residence.
Ken and Bill gave good answers to your question below. The answer to the question of whether you can “stay clean of any trouble?” is still no. No you can’t “stay clean” if you proceed to take out an owner occupied loan without disclosing to the lender that you do not intend to continue to occupy the property. At the closing of the refinance you will be asked to sign at least three times if not more, statements and affidavits certifying that you intend to occupy the property as your primary residence. How will you sign those under the circumstances you describe?
Sorry to be so blunt, but when a lower interest rate is staring you in the face it is sometimes hard to realize what needs to be done. This advice may be free, but it is priceless if it keeps you from making a really big mistake. A mistake that will cost you much more in the long run than the relatively small amount you will save with a slightly lower rate on your refinance by saying you intend to owner occupy a property when you don’t.
You need to alert the lender that is processing your refinance as to your intent right away. Lenders have numerous ways to detect fraud, occupancy fraud being the most prevelant, not limited to post closing audits, credit pulls and inspections of the property to determine who is occupying it. Read your disclosures they should outline the penalties for committing fraud. They will at least call your loan balance due in full, they could refer you to the FBI, jail time, finacial penalties and you could be added to the LDP list which all banks refer to on every loan application which will affect your ability to obtain financing ever again. In this day of scrutiny that mortgage lenders/banks are under that they will NOT hesitate to make an example of you.
You came here to get some advice, you got it, I hope you use it.
Thank you guys who answered my earlier question…
I did want to further clarify my position…I am going to closing on my current property in the next day or two. It is being considered my primary residence. However, as of last week I am under contract on a new home and plan to keep my current home as a rental. I do NOT have a lock on the new home purchase yet, therefore my credit has not been pulled. Can I close, then get locked in on my new home the day after and stay clean of any trouble???
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