Is this fraud?

We are looking at an investment property. We can't put the 10% down for an investment loan. We are planning on living in it for a few months (while we are in between houses) so we can get a better loan.
We will be selling it after we move out and renovations are done.

Typically, in America, if you purchase a "primary residence" you can live it in for whatever amount of time you want, and sell whenever you want. However, there are a few catches to be aware of.

First, since you will be living in the house it is your primary residence. If you sell this house without living in it for two years, you will have to pay capital gains tax on the sale. If the property is sold for more than $250K (for a single person) or $500K (for a married couple), you will have to pay capital gains tax regardless of how long you live there.

Second, the lender may have a pre-payment penalty. This means if you don't stay in the property for a specified period of time, you will have to pay a penalty (3% usually) on the amount of the loan. This is like paying an extra 3% in interest. Most lenders do not have a pre-payment penalty on a "primary residence" loan.

Check the terms of the loan to determine if the lender has a pre-payment penalty. If not, then there should be no problem with your plan. If there is, remember to factor in that pre-payment penalty when selling; it will reduce your return.

Hope this helps, and good luck!

I have no answer. tho I thought I'd ask you to state your country as it may help those that can answer

Check the lending terms. Many lenders stipulate the length of time you must reside in the property after the loan closes.