Can you buy a home in an LLC while getting a mortgage?
Buying property under an LLC sounds great on paper - protect your assets, separate personal from business finances, and look professional doing it. But mortgage lending throws a wrench in those plans. Most standard mortgage programs require individual names on the deed line at closing. Let's break down what's possible, what's not, and how to make smart moves regarding LLC's and buying a home.
Standard Mortgage Programs: The Ground Rules
Fannie Mae's Stance
Fannie Mae keeps things straightforward - they require individual borrowers' names on property titles at closing. No corporations, partnerships, or other legal entities allowed. But here's the silver lining: after closing, transferring to an LLC becomes possible under these rules:
Your loan must have started after June 1, 2016
You need to own or control most of the LLC
For primary homes, wait one year before transferring
Investment properties can transfer right away
Before refinancing, the property needs to come back into your personal name
Freddie Mac's Position
Freddie Mac follows similar guidelines but with their own twist:
You must control or own most of the LLC
Primary homes need that one-year waiting period
Investment properties can move to LLC ownership immediately
Like Fannie Mae, property ownership must return to individual names for refinancing
A key detail for refinancing: both Fannie Mae and Freddie Mac count time in an LLC toward your six-month ownership requirement for cash-out refinances. Just remember to transfer the property back to your name before starting the refinance process.
Government-Backed Programs and LLC Ownership
FHA Loans
FHA loans stick to their primary mission - helping individuals become homeowners. They don't allow LLC closings, period. The focus stays on owner-occupied properties with individual borrowers.
VA Loans
VA loans serve veterans and service members personally - not their businesses. These loans require individual names on titles, matching the veteran's eligibility.
USDA Rural Development
USDA loans target individual homeowners in rural areas. Business entities don't fit their program goals, so LLC ownership isn't an option at closing.
Non-QM Loans: The LLC-Friendly Option
Non-qualified mortgages open doors that standard programs keep closed. These loans allow LLC closings from day one. The trade-off? Higher interest rates reflect the increased flexibility. Some borrowers find the higher costs worth the immediate LLC benefits.
The Due-on-Sale Clause: Your Transfer Safety Net
That intimidating "due-on-sale" clause in your mortgage? It gives lenders the right to demand full payment if you transfer the property. But transfers to LLCs you control usually stay safe. Still, check your specific loan terms and consider getting lender approval before making moves.
Smart Steps for Property Transfers
Before moving property to an LLC:
Review your mortgage agreement carefully
Check seasoning requirements based on property use
Keep detailed ownership records
Consider tax implications
Update insurance policies
Think about future refinancing needs
Ready to Navigate Your Options?
Property ownership structures shape your financial future. Our team at Bellhaven Real Estate understands these complex waters. We help match your property goals with the right financing approach, whether that means starting with individual ownership or exploring non-QM loans for immediate LLC closing. Contact us to map out your best path forward.