Is it possible to create a LLC for property investment and obtain an FHA loan?

Question

I'm interested in forming a company to invest in property for tax reasons. I currently don't have a mortgage and never have, is it possible to obtain an FHA loan for a piece of property and have the newly formed Investment company own this real estate?

Answer 1

Generally you must occupy the home when getting an FHA loan.

There can be exceptions, especially during COVID, but the general rule is that you have to live in the property. That is something they will make sure you understand when you apply for the mortgage. Expect that you will have to sign paperwork to this effect during the settlement process.

Now after you buy the property, and live in it for a while, you can then turn it into a rental property. During that time you can transfer it to the LLC, but make sure you consult your tax advisor to make sure you have met all the requirements.

Answer 2

Two important things to know:

1. FHA-insured loan will require that you occupy the subject property for a year, and

2. Security instrument will have a clause to the effect that "If all or any part of the Property or any Interest in the Property is sold or transferred (or if Borrower is not a natural person and a beneficial interest in Borrower is sold or transferred) without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument"

If your plan is to purchase an investment property to be held by a LLC, you may not want to go the FHA route.