Mortgages and Living Trusts in California

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Trust-held purchases and refinances are routine in my practice. Call (800) 239-1103.

Revocable living trusts are extremely common in California, especially in the Bay Area. If you’re buying into a trust, refinancing a home already in one, or planning to move your home into a trust after closing, the good news is that mainstream lenders handle it every day. The key is getting the trust documents in front of the lender and title company early.

Why California Owners Use Living Trusts

A revocable living trust lets your home pass to your beneficiaries without going through probate, lets a successor trustee manage the property if you become incapacitated, and keeps the details out of the public court file. California probate can take a year or more, and statutory fees are significant: under Probate Code §10810, the attorney’s fee — and separately the executor’s fee — is 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million, calculated on the gross value of the estate without subtracting the mortgage. For a $1.5 million home, that’s $28,000 for the attorney and $28,000 for the executor — about $56,000 before court costs and other expenses.

What Lenders Require

Fannie Mae’s rules for an inter vivos (living) revocable trust are a good template; most conventional and jumbo lenders follow something similar:

• The trust is established by one or more individuals, and the primary beneficiaries are the people who created it.
• The trustees include the person who created the trust (or an institutional trustee), and the trustees have the power to mortgage the property.
• For a primary residence, at least one person who created the trust lives in the home and signs the loan documents.
• The loan is underwritten on the individual’s income, credit, and assets — not the trust’s.
• Title insurance confirms title is vested in the trustees.

In practice you sign the note both individually and as trustee. FHA and VA also permit revocable living trusts when the beneficiaries are the borrowers who occupy the home; confirm the lender’s specific requirements at application.

Documents You’ll Need

• A certification of trust (California Probate Code §18100.5) — a short summary signed by the trustees — or a copy of the relevant trust pages. Many lenders accept the certification; some also want to see the full trust or specific sections.
• Any amendments or restatements
• Your normal income, asset, and credit documents

Send these at application. Trust review is rarely a problem for a properly drafted revocable trust, but hunting for documents mid-escrow is a common source of delay.

Common Scenarios

Buying directly into your trust

You can take title in the trust at closing — for example, “Jane Smith, Trustee of the Smith Family Trust dated January 1, 2020.” Tell your lender and escrow officer at the start so the vesting, loan documents, and title policy all match.

Refinancing a home that’s already in your trust

Many lenders will refinance with title remaining in the trust after reviewing it. Some require the property to be deeded out of the trust to you individually for closing and deeded back afterward; your title company records both deeds. Either way, update your estate plan records afterward.

Moving your home into a trust after closing

Recording a deed into your own living trust after closing is common. The federal Garn-St Germain Act prevents lenders from using the due-on-sale clause for a transfer of a home with fewer than five units into an inter vivos trust in which you remain a beneficiary and occupant. Keep your lender informed, and make sure your homeowners insurance names the trust.

Irrevocable trusts

Irrevocable trusts are a different animal. They generally don’t fit agency guidelines, and financing usually comes from portfolio or non-QM lenders that review the trust’s terms and the trustee’s authority. Involve your estate attorney early.

Inherited homes and successor trustees

When a trust’s creator passes away, the successor trustee may need to borrow — to pay expenses, make repairs before a sale, or let one beneficiary buy out the others. Some lenders make loans to trusts and estates for exactly this; it’s the kind of file where a broker’s lender options matter. Older owners weighing a reverse mortgage can generally keep the home in a living trust too, subject to the lender’s trust review.

Property Taxes

Transferring your home into your own revocable trust generally isn’t a change in ownership for Proposition 13 purposes, so it doesn’t trigger reassessment. Transfers to children or others after death follow different rules under Proposition 19. Ask your estate attorney how your plan handles reassessment.

Frequently Asked Questions

Can I get a mortgage on a California home held in a living trust?

Yes. Conventional, jumbo, FHA, and VA lenders generally allow title in a revocable living trust when the people who created the trust are the borrowers and beneficiaries, the trustees can mortgage the property, and the lender approves the trust documents. You sign individually and as trustee.

What trust documents does the lender need?

Usually a certification of trust under California Probate Code section 18100.5, and sometimes copies of specific trust pages or the full trust, plus any amendments. Providing them at application avoids delays.

Can I buy a home directly into my trust?

Yes. Title can be vested in your name as trustee of your trust at closing. Tell your lender and escrow officer early so the vesting, loan documents, and title policy all match.

Will transferring my home into a living trust trigger the due-on-sale clause?

For a home with fewer than five units, the federal Garn-St Germain Act prevents lenders from enforcing the due-on-sale clause when you transfer the property into an inter vivos trust in which you remain a beneficiary and occupant. Keep your lender and insurance company informed.

How much can a living trust save compared with probate?

California’s statutory probate fees for the attorney and the executor are each 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million, based on gross estate value. On a $1.5 million home, that’s about $56,000 combined, before court costs.

Related Resources

• Mortgages for LLCs and Trusts
• Reverse Mortgages in California
• Proposition 19 Property Tax Transfers
• Refinancing in California
• Divorce and Your Mortgage
• Jumbo Loans in California
• California Mortgage Glossary