Mortgages for LLCs and 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. I structure LLC and trust financing for California investors regularly — getting the vesting right at the start saves problems later. Call (800) 239-1103.

California investors often want rental property held in an LLC for liability and management reasons, and homeowners often want their residence in a living trust for estate planning. Lenders treat these very differently. This guide explains which loans can close in an LLC, what happens if you move a property into an LLC after closing, the California property-tax rules that come with it, and why a living trust is usually the simpler answer for a primary home.

The Short Answer

Why Conventional Loans Close in Your Name

Fannie Mae, Freddie Mac, FHA, and VA loans are made to individuals. An LLC can’t be the borrower on those loans. That’s why investors who want an LLC on title at closing use non-QM or portfolio financing instead.

DSCR and Other Loans Made to an LLC

Many DSCR lenders will close in the name of an LLC (and sometimes a corporation or trust). The property qualifies based on its rent compared with the payment rather than your personal income, so tax returns usually aren’t required. What lenders typically do require:

• A personal guarantee from the members, and their credit reports
• LLC documents: articles of organization, operating agreement, EIN letter, and a certificate of good standing
• A down payment, commonly 20% or more for purchases, and reserves
• A property that rents for enough to meet the lender’s coverage ratio

Rates are higher than conventional investment loans, and some DSCR loans carry prepayment penalties — ask before you lock.

Portfolio and Commercial Loans

Some banks and credit unions keep 1–4 unit or small multifamily loans on their own books and will lend to an LLC. Expect personal guarantees, shorter terms or balloon structures on some products, and pricing that differs from residential loans.

Moving a Property Into an LLC After Closing

Most mortgages include a due-on-sale clause that lets the lender demand payment if title transfers. The federal Garn-St Germain Act protects certain transfers on 1–4 unit homes — such as into your own living trust when you remain a beneficiary and occupant — but it doesn’t protect transfers to an LLC.

Fannie Mae, however, lets servicers allow a transfer to an LLC without enforcing the due-on-sale clause when the loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and the LLC is controlled by, or majority-owned by, the original borrower. Any occupancy promises in the loan (such as living in a primary residence for 12 months) still apply, and the property must be deeded back to an individual to refinance with Fannie Mae later. Freddie Mac has a similar policy. For other loans, the risk that the lender calls the loan is real. Check who owns your loan and talk to a real estate attorney before recording any deed.

California Property Tax and Other Costs

• Reassessment: transferring property into an LLC is generally excluded from Proposition 13 reassessment when your ownership percentages stay exactly the same before and after (Revenue and Taxation Code §62(a)(2)). Later changes in who owns the LLC can trigger a reassessment.
• BOE filing: legal entities must file form BOE-100-B with the Board of Equalization within 90 days of a change in control or ownership, even when an exclusion applies. Missing it can bring penalties.
• Franchise tax and fees: California LLCs generally owe an $800 minimum annual tax, plus an LLC fee once gross receipts exceed certain levels.
• Insurance: the LLC should be named correctly on the landlord policy, and the lender will check.

An LLC’s liability benefits depend on how it’s set up and run. Your attorney and CPA should weigh in on whether an LLC, umbrella insurance, or both make sense for you.

Living Trusts: The Simple Option for Your Home

For a primary residence, a revocable living trust is widely accepted by conventional, FHA, and VA lenders. You’re typically the trustee and beneficiary, you sign the loan individually and as trustee, and the lender and title company review the trust. It avoids probate without the due-on-sale and financing complications of an LLC. Details are in our living trust mortgage guide.

When the Bank Says No

Common roadblocks: a bank that won’t close in an LLC, a multi-member LLC with a member who doesn’t want to guarantee, a foreign national member, a short-term rental, or a property that doesn’t meet the coverage ratio. As a broker I can compare DSCR, portfolio, and commercial lenders with different rules for entity vesting, guarantees, and property types.

Frequently Asked Questions

Can I get a mortgage in an LLC in California?

Yes, but not a conventional, FHA, or VA loan — those are made to individuals. DSCR and other non-QM investor loans, and some portfolio or commercial loans, can be made to an LLC, usually with a personal guarantee from the members.

Can I transfer my property to an LLC after closing?

You can record the deed, but it may trigger the due-on-sale clause. Fannie Mae allows servicers to permit a transfer to an LLC controlled or majority-owned by the original borrower on loans it acquired on or after June 1, 2016, and Freddie Mac has a similar policy. For other loans, get legal advice first.

Will moving my property into an LLC trigger a property tax reassessment?

Generally not if your ownership percentages stay exactly the same before and after the transfer, under Revenue and Taxation Code section 62(a)(2). Later changes in LLC ownership can trigger reassessment, and the LLC must file form BOE-100-B with the Board of Equalization within 90 days of a change in control or ownership.

What’s the best loan for buying a rental in an LLC?

A DSCR loan is the most common choice. It can close in the LLC’s name, qualifies on the property’s rent rather than your personal income, and usually requires a personal guarantee, 20% or more down, and reserves.

Should my primary home be in an LLC or a living trust?

For most owner-occupants, a revocable living trust is the simpler choice. Conventional, FHA, and VA lenders accept it, it helps avoid probate, and it doesn’t raise the due-on-sale and financing issues of an LLC. Confirm your estate plan with an attorney.

Related Resources

• DSCR Loans in California
• Mortgages and Living Trusts
• Non-QM Mortgages
• Commercial Loans
• DSCR Loans for Short-Term Rentals
• Foreign National Mortgages
• Proposition 13 for Home Buyers