Many different factors influence residential real estate transactions. Your credit card balances and current income can affect how much a bank will finance a purchase. Your credit score and even your living arrangements can affect the interest rate that you pay on your principal balance.
With interest rates on the rise and the real estate market currently quite competitive, occupancy fraud has also been on the rise. If you intend to purchase a property but will not live there, it’s important that you understand what behaviors might lead to allegations of occupancy fraud.
You should only claim a property as your future homestead if you actually intend to move there and live at the property after closing. Otherwise, it is an investment property subject to different financing terms.
One of the reasons that lenders offer lower interest rates for owner-occupied houses is that these properties tend to receive better maintenance. The risk of default and foreclosure is often lower as well, as people will go to great lengths to avoid losing their homes in times of financial crisis but may readily abandon investment properties when trying to cut costs.
Additionally, whether you live at a property or not affects the tax rate and insurance costs and, therefore, how much you need to deposit into the escrow account for the mortgage. Misrepresenting your living situation or intention for a property could eventually trigger tax penalties and even criminal charges.
If a lender discovers that you misrepresented the occupancy of the property, they could notify the state, which could lead to mortgage fraud charges. While you may think that occupancy fraud is a victimless crime, the mortgage lender and taxing authorities related to the property likely will not agree with that perspective.
Avoiding mistakes when conducting big financial transactions can reduce your risk of accusations of white-collar criminal offenses like fraud later.