What does it take to be owner-occupied?

Cheryl Knowlton:             Hi everybody. Cheryl Knowlton with Dynamite Productions, here with Clay Johnson with Castle & Cooke Mortgage. Episode four of how to properly invest as a self-employed individual and rental properties. We kind of left you hanging last time a little bit. We’re going to talk now about exactly what to make sure you don’t do and what you do.

Clay Johnson:                    Yes, we wanted to make sure that you didn’t just take a cooler and move in for the weekend.

Cheryl Knowlton:           No coolers, no coolers.

Clay Johnson:                    One of the things when you’re doing an owner-occupied property, you need to sign a form that says your intent to occupying. That means you intend to occupy that property for at least one year. Now, there are some things that may change down the road, job transfer or something.

Cheryl Knowlton:             Death of a major family member, you know, whatever.

Clay Johnson:                    Death of a… Yeah, there are different things that could come up where there may be an exception to that. But, your intent and what you’re stating that you’re going to do, is to live there for one year. And that truly needs to be the intent, and the plan is that you’re going to live there. Not saying, “Oh, I can get a better interest rate as your last person.” But, this is how you do it the right way.

The other thing we want to talk about is the three different boxes you check when you’re doing a mortgage application. So, the three are-

Cheryl Knowlton:             Owner-occupied, second home, an investment property, and it’s very important that we’re very intentional and not sloppy with that because ultimately, you check the wrong box, you could wind up committing mortgage fraud and then changing residences to a federally gated community. We do not want that for you.

Clay Johnson:                    Yes. And especially in the case of a second home, there’s really no reason to say that you’re going to occupy it because the guidelines are so darn similar. On a second home, you do need to have every intention of living in that property for at least two weeks of the year that you’re going to be living in that property, so a couple of distinctions. Most people spend more time than that, but that’s the minimum guideline is two weeks per year.

Cheryl Knowlton:             Absolutely.

Clay Johnson:                    Yeah.

Cheryl Knowlton:             Okay. In our last episode, we’re going to talk a little bit more about what you can and can’t do. Let’s say you have a primary residence that’s paid in full. Can you say that your second home is actually going to be your primary, so come back to our last episode for the answer to that question and we’ll see you then.

Clay Johnson:                    Bye, bye.