A loan on a primary residence is different than a loan on a rental home. An investment property

requires a larger down payment (10% minimum) and has a higher interest rate. Some people don’t like that rule.
Such as a certain 38-year old living in Washington, D.C., who decided to “fudge” on his loan application.
Mr. Imran Awan applied online with his credit union for a home equity line of credit. He made the application in his wife’s name and stated it was her primary residence, owner-occupied.
The credit union approved the loan and gave them $165,000. Awan then sent the money to his father in Pakistan.
One year later, in January 2017, Awan paid off the loan. But wait, the story is not over.
The property was not owner-occupied. There were renters living in the house all along. He had deliberately lied on his loan application in order to get the line of credit that is not allowed on rental properties.
Both husband and wife were arrested on felony charges. I don’t know if Awan’s wife was blindsided or if she was in on the scheme, but I do know that Awan pleaded guilty in exchange for his wife being dropped from all charges.
He awaits his sentencing on August 21st. The charge carries a maximum sentence of 30 years in prison.*
The lesson here is that paying a higher interest rate for a non-owner occupied home (or foregoing a line of credit) is better than being awarded a new primary residence in prison.
When Can a Person Turn Their Primary Residence Into a Rental?
The standard Deed of Trust allows a home owner to turn their primary residence into a rental after one year of occupancy. Then the person can purchase another primary residence and repeat, and then purchase a third home. And so on. This is one way to acquire a portfolio of investment properties, and it is perfectly legal.
* It is expected that the prosecutor will not ask for a prison sentence for Imran Awan because he paid back the loan in full. But one attorney says he could get six months. Ultimately, the judge will decide.