Buying a Home Shortly After Refinancing

AZ Primary Residence Mortgage rules

This article shall serve as an informational piece as well as a fair warning.   Answer this:

Why would I would have just categorized and closed an Arizona refinance for a dear client of mine as an investment refi when they 100% absolutely occupy the home that we refinanced as their primary residence?

The simple answer is that occupancy AND occupancy intent are hot buttons in the mortgage industry right now.  My client stated clearly in our initial interview that he will be turning this property into a rental within the next few months.  As you will find out below, if I did not set up his new mortgage refinance up as a rental or non owner occupied transaction we would have completely stalled his effort to finance a new primary residence in the coming months.

Occupancy (owner occupied, non owner occupied or vacation home) has always been a “big deal” when it comes to getting approved for an AZ home loan.   More recently, mortgage investors have tightened the screws on how they evaluate occupancy when considering a new mortgage application.  Specifically, investors are requiring that mortgage underwriters analyze what a Phoenix home loan applicant has done in the past 12 months relative to mortgage activity.

6-12 Months Makes All the Difference

Underwriter’s are now required to review any and all mortgage activity a loan applicant has made within the 12 months prior to current loan they are applying for.  Underwriters are looking to see if an Arizona loan applicant has completed any mortgage transaction(s) as a primary residence within the preceding year.   Now, this is where the slope gets slippery.  Even if a new mortgage applicant just refinanced their existing home within the past 12 months and they then attempt to apply for a new primary residence mortgage, the underwriter analyzing their file may deny them OR they may require a deeper explanation.   The question that the underwriter will raise in this situation is “why would the loan applicant refinance their home as a primary when they were planning on buying a new primary in the near future?”  This type of activity is being spun as potential occupancy fraud or misrepresentation.

A borrower in this situation must then show the underwriter why their intent to occupy their previous home has changed significantly over the past few months and why they now want to move to a new primary home.  Typically, if a borrower refinanced or purchased a primary within the previous 6 months an underwriter will not allow them to purchase a new primary.  If they refinanced or purchased a primary within the past 6 to 12 months AZ mortgage underwriters are more likely to have an open ear and will consider the circumstances the led to the move to a new home base.

What is the Solution?

There are 2 solutions to this situation

1. Have a complete/thorough conversation with your Arizona Mortgage Lender regarding your future plan.  If you are seriously considering buying a new primary residence within 12 months after refinancing your current primary residence you need to consider refinancing based on your intent and NOT your current occupancy status.  Yes, you can absolutely do this.  Will you get a higher interest rate?  Absolutely.  Is it the right thing to do?  Absolutely.  Will you now be able to buy your new primary home thanks to careful accurate planning?   Absolutely!

2. If you find yourself in a situation where an extraordinary circumstance is causing you to need to move to a new primary you can work with your Phoenix Mortgage Lender to document what happened.  Take a look at this story as an example of an extenuation circumstance/neighborhood shooting – VA BUYER NEEDS TO MOVE

If you have questions regarding your own scenario please call or email me directly.

By Jeremy House
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