forming LLC for funding?

5 Replies

Hello BP community, I am in the works of buying my first investment property (owner-occupied house-hack). I just talked to my first mortgage broker and he is wanting me to set up an LLC so that he can have the docs in order for him to give me a pre-qual letter. Starting out, I didn't think forming an LLC would be necessary, especially since I don't have much wealth to protect or equity in the property. What do you guys think? Is this a common request from mortgage brokers? If so, why?

Also, on the same subject, this broker is wanting to set me up with a "construction loan" which will last as long as 6 months at 10% plus interest. I would then refinance after the construction. BRRRRRRR...Sounds like hard money to me which I know can be high risk especially for my first deal, but what other options do I have? I have a chunky down pay and good credit but scattered self-employed income since I'm a student.

@Nathan Helm

I strongly suggest finding a different mortgage broker, or using a bank. What you're describing is not typical - sounds like someone trying to take advantage.

If this is your first property, and it's distressed/in need of repair, I suggest obtaining an FHA mortgage with a 203(k) rehab loan.

got it, thanks, Paul! Sounds like I'll have to go with the creative finance route. Unless I want to work for to years and delay getting started into real estate. JK! that's not happening 

Originally posted by @Nathan Helm :

Thanks for the response, Damian. I will definitely look into that... Do you think I can get an FHA 203(k) with my low/spotty self-employed income?

Short answer is no.

You shouldn't need an LLC unless you're getting a DSCR or business purpose loan and the state (like Florida) requires it.

FHA is for owner occupied properties only.