Legal Question in Real Estate Law in California

Re: non-owner occupancy of a 2nd home

It could, potentially, be very serious. First, you got a LOWER interest rate by claiming that you would occupy the property; moreover, most loans such as this provide that you will occupy for a specified period, 1-2 years, minimum. Also, your insurance coverage would likely be based upon owner-occupied and is cheaper and if there is a claim and you have a tenant occupying, it has a great likelihood of being denied. If you pay your loan on time, you will have less chance of a lender learning of your sitation, BUT, because your loan is not purchase money (i.e., it is a refinance)then if you default on the loan and the property has gone down in value, the lender can look to you for a deficiency judgment and can also claim fraud due to the fact that you were supposed to be occupying it! The old, "we changed our minds after we got the loan" excuse has been tried over and over and I have had to defend borrowers whose only explanation as to why they are renting out their property is a "change of mind" in fraud suits brought by lenders and the results are 50/50, not the best of odds.

Re: non-owner occupancy of a 2nd home

I really can't help you based on this set of facts.

The important part would be to check the provisions of your contract carefully.

Usually, the lender only wants to be paid on time, but not always.

Read your contract, and if it isn't clear what your answer is, fax it to me, or find a local attorney willing to help you.

Generally, the old adage that "an ounce of prevention is worth as pound of cure" is accurate. Reading your provisions will (hopefully) give you that "ounce of prevention".