Delayed financing problem with LLC

8 Replies

Ran into a small problem with a refinancing problem with my LLC, which is 50/50 ownership. Problem was with our cash out refinance at 6 months. Fannie stated that both of our names needed to be on the loan for the cash out refinance because we are 50/50 owners. We each can have ten properties with conventional financing and we want 10 properties each but having to put both our names on the loan takes that option away. Plan is, if we can do this, buy property all cash from our LLC checking account and put title in my personal name, then do immediate cash out refinance (delayed financing). Problem might be that Fannie will look at where funds came from, our LLC account that’s owned 50/50 and we run into the same problem????? I already know other solutions to this problem but this is how we want to do this in the future. We are also quit claiming back into our LLC at close of Escrow so loan will be in one of our names and property in the LLC name.

Or you can find a bank that would carry the note in house. 

@Harjeet Bhatti thanks for the info, but what if I transferred the amount of purchase to my personal bank account and considered that money to me a paid salary from LLC, than made the purchase in my name with those funds and did my cash out refinance. Would this work?? Maybe there is a seasoning period with this? I know another solution is just changing our LLC’s to 51/49 ownership and get the 10 each that way. We don’t want to wait the 6 mo the seasoning anymore for our first 10 rental properties.

@Mike Flora this should work as long as you can prove by paper trail. About LLC property count see guidelines from Fannie Mae:-

The following property types are not subject to these limitations, even if the borrower is personally obligated on a mortgage on the property:

  • commercial real estate,
  • multifamily property consisting of more than four units,
  • ownership in a timeshare,
  • ownership of a vacant lot (residential or commercial), or
  • ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).
Harjeet Bhatti, Lender in IL (#230554)
+18479628229

@Harjeet Bhatti thanks for the info, we are going to quit claim deed the property into the LLC name at end of escrow but the financing will be in my name. Just getting through the refinance process, as explained in original post, was the problem. I already understand the due on sale clause with how I’m doing this but not too worried about it and not worried about rectifying that problem if it arises.

@Mike Flora

This caught me by surprise.  So, can I ask this?

If a property (SFR) is bought from checking account funds of Spouse 1's single member LLC . . . with the title then put in both spouses' names with the intent that Spouse 2 will delayed finance (because Spouse 1 is currently unemployed and likely unable to get financing) . . . will this be a problem? Based on your story it looks like it could be due to the source of funds not 'belonging' to the financing spouse, and it is not something I considered.

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Does Quit Claiming not break the chain of title and potentially interfere with the Title Insurance policy you may/or may not have purchased upon acquiring?

Thanks.

@Teri B. This doesn’t sound like you would have a problem with just including your spouse on the deed/title. If it’s just your name on the LLC as 100% Owner then there is no issue. Our issue was that we own it 50/50 and we wanted to refinance into a conventional loan in one of our names. Fannie would not let us do that. If it was 51% me and 49% my business partner then I could have put it in my name. The quit claim was to just have the property itself in my LLC name and keep the loan in my personal name. Title insurance really has nothing to do with this quit claiming part at all. Fannie/Freddie won’t let you have loan and title in LLC name so it’s just a little trick you do at closing in Escrow to keep the actual property in the LLC name. Yes the due on sale clause is in play but can be fixed if ever an issue since your the owner of the LLC. Be shocked if that ever was an issue on this matter. I’m sure there are lenders/Escrow and title people that can add to this. I’m not an expert on the lending/title side but have a pretty good grasp of my situation after speaking to my lender again. Let me know if I misread your question and responded wrong. Thanks

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