Leasebacks and Buying New Home

Leasebacks and your new home

The difference between a primary residence and an investment property when it comes to a home mortgage are significant.  In short, buying an investment property or “rental home” typically carries a higher interest rate and a higher down payment requirement compared to a primary residence or “owner occupied” home.  Arizona home-buyers often ask “how soon after my closing do I need to move in to my new home in order for it to be considered a primary residence?”

To make things even more interesting, sellers will sometimes ask the new buyer of their home to allow them to stay in the house even after the sale is complete.   This is known in the Real Estate world as a “leaseback.”   It is a situation where the buyer rents the house back to the individual they just bought it from for a period of time.  The presence of leaseback language on a real estate contract can raise major red flags with the new buyer’s Phoenix area mortgage company.   The underwriter that is reviewing the buyer’s home loan application for a primary residence home loan will be looking to make sure the buyer is actually planning on occupying the property.   While the buyer does not need move in to their new home the moment after they close on their new home, the mortgage industry does need a measurable standard to use when determining when the buyer of a new home is required to move into their new home.

60 Days is the Answer

Sixty days after closing!  The buyer of a new home that is being financed as a primary residence must move into their new home within 60 days of the close of escrow date.  This is the date that the homeowner’s purchase records with the County.  Whether the buyer is using an FHA, VA, Conventional or USDA mortgage to purchase their new AZ home, they need to move in within 60 days after closing.

If the seller is in their previous home as a tenant for those 60 days after the new buyer purchases the property that is a-okay.  As long as the new buyer puts their name on the mailbox, parks their car in the garage and calls the new house their home within 60 days of the date they close they are within acceptable mortgage guidelines and may consider the home a primary residence.

If you have any questions about how a leaseback works or how soon you must occupy your new home after closing please call or email me today!

By Jeremy House
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Comments

  1. BUT~ don’t forget about insurance issues! New policies must be taken out~ it can be very very complicated~

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  1. […] VETERANS: NO NEED TO SCHEDULE MOVERS RIGHT AWAY When an Arizonan purchases a new primary residence the mortgage gods typically require that the proud new homeowner occupy it within 60 days from the day they closed in order for the home and the mortgage used to finance it to be categorized as a primary residence.  Check this out for more information on how soon a buyer needs to occupy their new home and why: OCCUPANCY RULES […]

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