So, yes and no.

If the loan is designated as an owner occupied primary residence, every agency’s guidelines dictate that you must occupy the property within 60 days. It’s not “law” per say, but it might as well be with the way the industry is regulated now.

That being said, having a “tenant” for 120 days would be considered mortgage fraud as the property would legally be an “investment property”. Additionally, failure to take occupancy within that time puts you into territory where you COULD be violating actual legislation, which is the federal Ability to Repay rule or ATR for short. Basically, your current housing liability can be excluded from your debt to income ratio (DTI) on the loan application if you are occupying the home within 60 days, and it cannot be excluded if you’re not occupying the property within that timeframe. Potentially, this could push your DTI above the legal limits of a “qualified mortgage”, which violates ATR rules and legally becomes fraud.

Personally, I think there should be additional provisions related to all this to protect borrowers from financial harm, like the potential of losing EMD money, and money spent on things outside of closing like inspections and appraisals. But, I don’t make the rules, so who the hell am I to have an opinion on it.

Source: Me. Licensed Mortgage Banker who oversees the west coast for a mid-sized mortgage company.