Rental Property Conventional Lenders That Will Close In An LLC?

Question

I have been looking at doing a DSCR loan but looks like I'm giving up on that as DSCR loans require bank statements anyway and if I'm going to provide that, I might as well go Conventional and have significant rate savings.

I can obtain a co-signor/Guarantor and make changes to the Operating Agreement as need to be to satisfy a lender as has been suggested as an OA is not a recorded document anyway.

What are some Conventional lenders that will close in an LLC? There are apparently Conventional lenders that do it commonly, even though its not their first choice. A believe a person has to sign a personal guarantee anyway, regardless of whether a DSCR/Non QM or Conventional. In this market it seems I might as well obtain the rate savings.

Heith Reade · Answer

Honestly, the way rates are right now conventional financing is no better than a portfolio or DSCR loan. I always price both for my clients and more often than not we go the DSCR direction because the ease of paperwork and essentially similar rates/costs make the DSCR the superior option. Best of luck Burt!

Stephanie P. · Answer

@Burt L.

You're reading way more into the bank statement requirement than is necessary.  One of the reasons for the bank statement requirements is so the lender can set up an ACH for payments.  If you're getting a bunch of cash out from the refinance, the lender will allow the cash out to be used for reserves so if you don't have a bunch of NSF's, there's no harm in providing bank statements.  You can even go start up a new business bank account if you don't have one for your LLC.  Not sure why you're hung up on it.

Conventional financing will not allow you to close in an LLC with multiple members.

If you can close as an individual and use full tax returns, then conventional is the way to go for lower rates/fees.  Other than that, go DSCR in your situation.

One girl's opinion.

All the best

Stephanie

Zach Wain · Answer

@Burt L. - a conventional loan can not close/hold title in a Trust.  Fannie/Freddie requires title to be held by a natural person or a revocable trust.  Their guidelines do not allow title to be held in a LLC.  If a bank closed a loan in a LLC, it was not a conventional loan, it was a portfolio'd loan.  Otherwise, DSCR etc will do it

Jay Hurst · Answer

@Zach Wain  Fannie and Freddie are both ok with as long as the same borrowers on the loan are the members of the LLC.

Jay Hurst · Answer

@Burt L.    The bank statements are simply to show down payment (if a purchase) and what ever reserves are required for the particular program that is offered. (We have programs that require no reserves, and some programs that do, so it program to program) That is it.

And of course you will have to provide bank statements for the same reason on a conventional loan but you will also have to prove your income with tax returns, pay stubs, w-2's etc on a conventional loan.  And you will have to close in your personal name. BUT, you can transfer the property to a LLC after closing without an issue:

Fannie Mae transfer to LLC

Ned Carey · Answer

@Burt L. It may not make a difference. ANY loan you get in an LLC will be at higher rates than a property owned in your own name. I don't know exactly what you mean by a "Conventional loan" but even traditional banks and lenders will charge close to what  DSCR loan will be for a commercial loan for rental properties. You may find that it is cheaper in your area but you may not. In my area I can't get any loan in an LLC for 30 years in an LLC unless it is a DSCR loan.

In general as mentioned Credit unions and Local Banks are usually your best bet. My experience in local banks is they don't do 30 year loans and the rates aren't any better than DSCR. You may have better luck with Credit unions. I have never dealt with them.

Devon Harris · Answer

I was able to close in an LLC with my local credit union

Eliott Elias · Answer

What's wrong with them asking for bank statements? They don't have to look the best, the lender just has to know how to vouch for you. DSCR is the only way I know so far, it's not any more lenient with a commercial loan

Nick Belsky · Answer

@Burt L.

DSCR does not require bank statements.  If a lender is asking you for them, it is likely for ACH purposes or to show reserves.  If for reserves, you can use other accounts such as retirement accounts, stocks, bonds, etc... many even take crypto statements now.  You may want to speak to a mortgage broker who can help you find a better lender to fit your needs.  The rate savings for conventional currently is negligible and is less than a 0.25% if you are looking at the right lender.

Fannie/Freddie, and other agency loans, do NOT lend to businesses.  Only individuals.  You cannot maintain conforming status by even vesting in a business. If you find a conventional lender that allows this at closing, then the loan is not being sold on the secondary market as it is non-conforming.  Many banks and credit unions will give traditional underwritten loans that follow Fannie/Freddie but are serviced and held by the bank or credit union.  They may lend to a business but these are NOT conventional loans.

If using a trust, it must be an inter vivos revocable trust or a community land trust.  I am currently processing a batch of refinances for a borrower who is vesting in such trusts with conventional loans and having no issues whatsoever.

https://selling-guide.fanniema...Many will Quit Claim Deed a conventional loan to their business after closing.  While Fannie allows this, the lender may not.  Be sure to read your note in detail about whether transferring vesting is allowed.  To be fair, many lenders threaten to accelerate the note in such cases, but I've never met anyone who has had a lender do so only by QCD to a business.

Cheers!

Zach Wain · Answer

Good info Jay, I was always taught the servicer can use the acceleration clause if you move to a LLC, but it looks like Fannie is ok with the change post closing

Rental Property Conventional Lenders That Will Close In An LLC?

Most Popular Reply