If my LLC owns habitable property, can I still use FHA?

[Kayla Davis]

Hello! I debated between posting this here and in Conventional Financing, so here's to hoping I picked the right forum!

I'm toying with the idea of purchasing a less expensive property outside of my local area for buy and hold purposes, and also toying with the idea of putting an LLC in possession of the property for legal protection and to reap the other known benefits of having an LLC...

However, I don't want to ruin my personal chances of getting an FHA loan for a more expensive home in my local area with little down as a first time homebuyer, and I wondered what the word was.

Do I still qualify for an FHA loan even if an LLC in my name is in possession of habitable property?

[Joseph Zanazan]

Originally posted by @Kayla Davis:

Hello! I debated between posting this here and in Conventional Financing, so here's to hoping I picked the right forum!

I'm toying with the idea of purchasing a less expensive property outside of my local area for buy and hold purposes, and also toying with the idea of putting an LLC in possession of the property for legal protection and to reap the other known benefits of having an LLC...

However, I don't want to ruin my personal chances of getting an FHA loan for a more expensive home in my local area with little down as a first time homebuyer, and I wondered what the word was.

Do I still qualify for an FHA loan even if an LLC in my name is in possession of habitable property?

Hello Kayla. Your candidacy for a new FHA mortgage is only limited if you already have a loan that is backed by the FHA. These mortgages are available to anybody and everybody. The catch is though that you only qualify for one FHA loan at a time. Regardless if the other property that is owned by your LLC with your name on it is financed conventionally, creatively or if its paid off, you would still be eligible to qualify for an FHA loan. Not certain what the financing terms of the property under the LLC is, and quite frankly it doesn't matter. Its common practice for many to purchase with FHA or VA (if eligible of course) terms, simply because they are more favorable in small or no down payment situations and gradually build enough equity to one day refinance out of the government backed loan into a conventional. This strategy utilizes your FHA eligibility as a tool. Once you have released the FHA insurance, youre now eligible to reutilize your capabilities all over again. As a "first time homebuyer" you're more likely to use an FHA loan to get into your first home, especially since you're occupying the residence and don't have a hefty down payment like most folks. You DON'T HAVE TO be technically be purchasing your first home ever to qualify for an FHA loan. You can purchase the property with a personal FHA loan, transfer the title to your LLC, eventually refinance out of the FHA into a conventional, RINSE & REPEAT. Youre not limited in these regards.

What you can be limited by though is the amount of properties you own and your debt to income ratios. I believe FNMA & FHLMC allow up to ten financed properties under your name, then you're gonna have to get creative with your acquisitions. Remember, even if your properties are paid off, the bank that is financing you will still hit you for taxes and insurance payments which effect your overall liability ratios. As long as the numbers make sense of course, you should be able to qualify for an FHA loan time and time again.