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Closing a Home Loan in the Name of an LLC

There are multiple reasons that residential real estate investors make the decision to Vest or Deed their property in the name of an LLC.

Asset Protection: One of the primary reasons individuals choose to use an LLC for a loan is to protect their personal assets. An LLC is a separate legal entity, and its owners (members) generally have limited liability for the company’s debts and obligations. If the business defaults on the loan, the lender typically cannot go after the personal assets of the LLC members.

Risk Mitigation: If the loan is for a business venture, using an LLC can help isolate the business’s financial risks from personal finances. This separation can be beneficial in case the business encounters financial difficulties or legal issues.

Tax Benefits: An LLC offers flexibility in terms of taxation. By closing a loan in the name of an LLC, the business can potentially take advantage of certain tax deductions and benefits that may not be available to individual borrowers.

Business Continuity: If multiple individuals are involved in a business venture, using an LLC allows for easier management of the loan and the business’s financial affairs. It provides a clear structure for decision-making and ensures the loan remains tied to the business rather than an individual.

Validation of a 1031 Exchange: if a property you are selling Is vested in the name of an LLC and you are buying another property, to maintain the integrity of the 1031 exchange, you will need to vest the property you are purchasing in the same name as the property that you have sold within the 1031 exchange.

Privacy: In some cases, using an LLC can provide a degree of privacy because the loan documents and property ownership may not be directly linked to an individual’s name, which could be advantageous for certain business strategies.

Estate Planning: For estate planning purposes, an LLC can be a useful tool. It allows for the orderly transfer of business assets to heirs or beneficiaries upon the owner’s death, potentially avoiding probate.

If you are purchasing a property and paying cash, there is never any issue with vesting in the name of an LLC, but if you are getting a home loan there are some restrictions to purchasing a property in the name of an LLC.

Vesting a home in the name of an LLC is not allowable for any transaction that includes a home loan using a Fannie Mae, Freddie Mac, VA, FHA, or USDA home loan.

CrossCountry Mortgage has several residential loan options for individuals looking to purchase or refinance a home vested in the name of an LLC. Some of the requirements to approve an LLC include but are not limited to; a review of the operating agreement of the LLC and the members to encumber the LLC as guarantors and confirmation of the Good Standing form the state that the LLC was formed and that of where the subject property is located.

Closing in the name of an LLC can be required from some residential real estate investors and for others it can be preferred. Our team is extremely well versed in providing residential real estate financing solutions allowing for the closing/ vesting in the name of an LLC