First Time Home Buyers and Mortgage Fraud

My nephew and his fiance are in the process of purchasing a home. They intend to have only her name on this home so when they decide to purchase another home he will qualify for a First time owner program. Can this actually happen?

1 Answer

Even if they were able to make it happen and thats a big IF, they face many issues as a result.

If they are planning on buying another home fairly soon, then they are going to end up doing one of two things:

  • move out of the existing home into the new home and a.) rent it out or b.) sell it.

If they rent it out within the first 12 months they (especially since they are planning this ahead of time) then they lied on their final closing documents saying they were going to occupy the property for 12 months. If they sell within 2 years they are exposing themeselves to unnecessary taxes and may be forced to use part of their lifetime exemption.

  • stay in the current home and rent out the 'new' home. In which case the husband would again need to lie on the application and closing documents since forst time homebuyer programs allow owner occupied only.

Another snag for this couple is that many states have community property laws which means any property owned by one spouse is considered equal property for the other.

The penalties for mortgage fraud (lying on an application is mortgage fraud) can be fines and up to 4 years in prison for EACH instance of fraud on the application. If the loan closes then they may also face federal charges of mail and wire fraud.

I have yet to see a First Time Homebuyer Program that was benefitial enough to go through this much hassle.

I hope that helps.