Can I refinance into an FHA?

[Eric Mcginn]

Let's say I bought a duplex with a commercial loan under an LLC now and rented it. And then at a later date live in one of the units and make it my primary residence, can I refi into an FHA loan?

In theory I would do this to free up the 20-25% down I have invested in the duplex as well as get a better APR.

[Jaysen Medhurst]

A bunch of things going on here, @Eric Mcginn, @Michael Goldsmith, @Chris L.

• You can refi into a FHA loan. You definitely need to run the numbers to see if this is actually a good idea, though.
• Unless your LLC has 2+ years of strong profits, the LLC won't get a mortgage. You'll still have to personally guarantee the loan. With only one property, it doesn't even really make sense to use a LLC for asset protection reasons. Unless you have significant other assets...in which, case why do you need to recapture that initial equity?
• You can get a commercial mortgage on 1-4 unit, 5+ unit, mixed use, retail, whatever. They are not limited to 5+.
• FHA will consider mixed use or 5+. There are some rules around it, though. The biggest issue will be finding a lender that understands those parts of the rules and will make the loan. Remember, FHA only guarantees the loan, it's the banks that actually issue the mortgage.
• Any loan with <20% LTV will have PMI. The downside of a FHA loan is that you don't get rid of that once you hit 80%. It sticks around of the life of the loan. There's also up-front mortgage insurance.
• Most commercial loans have rate resets every 5 years. Some longer, but usually with higher initial rate. They are also usually shorter (20-25 years) or have a balloon payment.