I was reading a post a colleague of mine wrote and it reminded me of something that happens all to often in lending. That darn Investment Property/ Primary Residence/ Second Home game. You know the one I'm talking about, the client is going to buy a home that is to close to their primary residence to be a legitimate owner occupied property or they are going to move into it after they fix it up but in reality they are not going to do that they just want to avoid paying higher rates or fees or they are stepping down in square footage and value to a fixer upper and moving into that home and will sell their other home later, yes that game.
Here is a solution: JUST PAY THE POINTS! Truth is a lender is guilty of fraud for knowingly representing a properties use for something other than what it is really intended to be used for. If you are flipping a property or your client may be flipping a property then use the highest rate you can to avoid paying any points if possible but if you are holding it rental income for several years have your lender factor how long it will take to recapture your costs compared to the reduction in rate for paying points.
Second solution is to factor the points into the deal. On investment property the seller can pay up to 2% of a buyers closing costs. Since you are negotiating a deal, try to negotiate the points as well. Ask the seller to pay the 2%. It's a real help and may take some of the pressure off you to play the game. The game of investment property/ Primary Residence / Second Home. That's one game I can do without. I hope you can too.
Call me for help relating to any home lending questions.
Sr Loan Officer