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I have heard that most banks will not let you purchase property under a LLC or if you try to transfer a property from your name to an LLC, often it will trigger a "due on sale" clause, so from what I gather, the only way around the "due on sale clause" is refinancing later
I guess, my idea was to purchase a home with a FHA loan, make it my primary residence for a while, then rent it out and eventually refinance it and transfer it to a LLC. Is this the way to do it?
In Virginia, we see rentals transferred to an LLC all the time without triggering a DOS clause. We'll even get refinances in where the name is in the LLC and we will condition evidence of transfer back to the "real person."
When property is transferred, no one notifies the lender. There are a couple of things to be aware of, the first is I am not a lawyer and this should not substitute legal advice. The next is some lenders and loan programs have a seasoning rule (how long title and the loan have been in place) for refinance and sale. In some (extreme) cases, fraud could be suspected. (Close an FHA loan one day, a "for rent" sign in the yard the next day). In lending, the weight is on intent. "You intend to occupy the property for at least one year." This does not mean you could be charged with fraud 4 months later when you are transferred to the other side of the country.....or somone in your family needs sudden care. But if you do have a change of circumstance, you should be able to document it. If your only reason to refinance is to change the title, you may not need to go this route.
You really need to discuss this with someone local as to what is acceptable in your area. With increased changes in regulations, audits on loan files are becoming common-place. So remember, your answer today may not be the same tomorrow. Get an answer today and then recheck the answer when you change the status.
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