Loan questions on First Real Estate Property Investment

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Loan questions on First Real Estate Property Investment

Kristine Doctor
Member since 2019 · 2 posts · 0 votes

Hello everyone,

First, I hope you are all having a great day! I am an aspiring real estate investor living in California where properties are so expensive. I've been reading books about real estate and learned the basic stuff especially getting started on how to get loans. The options I am currently looking at right now is to invest outside of California. I am willing to move if I can. I am planning to get a 4-plex property next year to house hack but I have few questions regarding the options I currently have in mind.

My plan in getting a 4-plex property is to get a FHA Loan with low downpayment (3.5%) and live in one of the units. My understanding is that you can get 3.5% Downpayment if you are a first time home buyer. My problem is I am not sure if I will be able to move right away. My Plan B, if I can't move is to get a conventional loan.

My question:

If I get a conventional loan using my name, I won't be able to leverage the FHA 3.5% Downpayment in the future (Pls correct me if I am wrong). So, if I get a Conventional Loan using an LLC, would still be able to get a FHA Loan with (3.5%) in the future since technically my first property is under an LLC?

Thanks in advance!

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  • Dolly Dabiri
    Member since 2018 · 3 posts · 2 votes
    7y

    There are some low downpayment conventional loan options as well. I've come across conventional loans of 3%. Conventional loans are just more particular about your credit score. 

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  • Michael Lewis Lee
    Wholesaler · Dallas, TX · Member since 2017 · 306 posts · 133 votes
    7y

    Hello Kristine!  With a conventional loan you start out with more equity and you do not have to go through a conventional bank but some are short term loans (6 to 12 months) and typically lower with interest rates.   I am not sure but I was going to say that one option of not moving right away is to lease one unit on a month to month lease which gives you more flexibility  but I do not know that loan will let you move in at a later date.  You can keep the same loan when you move out after the minimum period.  If you buy an add value property your 2nd or other loan might consider any raise in value or equity.

    Another unequal disadvantage to a Bank loan usually takes more time if time is important. A FHA loan is usually only available at a conventional Bank. Most Banks will take 60 to 90 days to close where a non-Bank source usually takes 7 to 10 days. Many financial lenders may want your personal name on the closing but then you might be able to transfer it into the LLC. Different financial companies want you personal name kept on the deal. If the subject is a foreclosure or an REO you are recommended to get title insurance on your loan the second you close.

    I do not understand your not being able to leverage a FHA loan. Hopefully, that 3.5% will just be a part of your total equity. Good luck to you!

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  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    7y

    @Kristine Doctor

    @Dolly Dabiri

    FHA will require you to move into the property within 60 days of closing. Conventional will require you to put down 20% - 25% for a 4 unit, primary home and 25% down for an investment property.

    The 3% down payment conventional loan is for first time home buyer single family residence loans. 

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  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 959 votes
    7y

    @Kristine Doctor, I'd connect with a local mortgage broker who can walk you through the whole process.

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  • Kristine Doctor
    OP
    Member since 2019 · 2 posts · 0 votes
    7y

    Thanks all for the responses! :)

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