Q: I recently closed on my home. My lender was aware that I might sell this property within the first year. However, I was required to sign an occupancy affidavit at closing.

The affidavit states that I cannot sell or rent within first year. My lender said that it is no big deal and I can sell within the first year if I want.

I have also thought about getting a roommate to help pay the bills. I assume that it is okay since I will be living there also, even though the roommate would be paying rent.

Finally, can you tell me why the lender cares if I sell within a year?

A: It has to do with the kind of loan you got. If you’ve received an “owner-occupied” loan – and most people do get loans on this basis – you got it at a more favorable interest rate than if you bought the property as an investment. In order to “prove” that the home is going to be your primary residence or second home, the lender has you sign the occupancy affidavit. Lenders need to know that the loan is given to a home buyer that has the intention, at the time of closing, to live in the home. The lender would not give you the loan on the terms you obtained knowing that you were buying the home as an investment.

If you have purchased the home and misrepresented what you intend to do with the home and statements you have made in the loan application, some would consider those actions as a fraud against the lender. While your “lender” may have said it was ok, she may have made those statements to assist you in getting the loan and for her to get a commission, rather than following her company’s rules and guidelines.

But don’t expect someone to knock on your door to see if it’s really you living there. The likelihood is no one will check. And, taking in a roommate doesn’t necessarily mean you’re violating your loan documents.

By the way, I’m thrilled that you’ve taken the time to read your loan docs. Most people don’t.

Published: Nov 21, 2005