Conventional · Fannie Mae B2-2-01Buying a house in an LLC with a conventional mortgage

Investors and some owner-occupants want to close in the name of an LLC. For a conventional loan sold to Fannie Mae, Selling Guide B2-2-01 sets the starting point: Fannie Mae purchases or securitizes mortgages made to borrowers who are natural persons and old enough for the note to be enforceable where the property is located, with no maximum age. The exceptions to the natural-person rule are listed: inter vivos revocable trusts, HomeStyle Renovation mortgages, and land trusts in states where the beneficiary is an individual (permitted on a negotiated basis where land trusts are widely accepted). An LLC is not on that list. A borrower establishes an ownership interest in the property and becomes liable by signing the security instrument, signing the note and taking title in the name of the individual borrower(s). So a buyer who wants an LLC on title should raise it with the lender before applying, since a Fannie Mae conventional loan expects the individual borrowers on title. A revocable living trust created by the borrower is the main alternative for estate-planning purposes, with its own requirements in B2-2-05. If the home is held in a life estate, the life tenant must be a borrower, remaindermen may also be co-borrowers, and the life tenant and all remaindermen must sign the security instrument.