Key Takeaways

  • LLCs and corporations can get mortgages, but financing options are more limited than for individuals.
  • Commercial and portfolio loans are common paths for businesses seeking mortgages.
  • Forming an LLC can offer liability protection and tax planning advantages but may come with higher interest rates and down payment requirements.
  • Mortgage terms vary based on lender, business creditworthiness, and property type.
  • A personal guarantee or strong financial documentation is often required for approval.
  • Transferring a property into an LLC after purchase may trigger lender consent clauses.
  • Working with investor-friendly lenders and legal counsel can improve outcomes.

If you're wondering can an LLC get a mortgage, the answer is yes. However, there are limitations in place that may make getting a mortgage in your company's name a less than ideal solution.

It Is Possible But There Are Limitations

Simply put, you can get a mortgage in your LLC's name. However, you need to evaluate your situation to determine if this is really the best course of action. One business owner, for example, decided to look into getting a mortgage for his LLC only to find the options for doing so are limited. Specifically, obtaining a loan with a low-interest rate is not an option that is available for most limited liability companies.

This business owner could have easily obtained a mortgage using his company's name if he were planning to pay in cash. However, like most other small business owners, he didn't have the means to pay for the property in which he was interested up front. Instead, he chose to purchase the property in his own name. He did so by making use of traditional financing options and putting an insurance policy in place to protect him if things went south. He made the decision to purchase in this way because conventional loans are the least expensive way for business owners to obtain rental property.

Traditional loans are ideal for this because they have:

  • The lowest available rates under most circumstances
  • Lower required down payments
  • Long-term, fixed financing rates

Loans of this nature have these characteristics because the federal government supports them and they can be sold to government-sponsored mortgage companies such as:

  • Fannie Mae
  • Freddie Mac

Traditional loans are good options. However, they cannot be awarded to an LLC. They can only be obtained by a:

  • Person
  • Living trust

What Lenders Consider When Issuing Mortgages to LLCs

Lenders look closely at a range of factors when determining whether to approve a mortgage for an LLC or other business entity. These include:

  • Business Credit Score and History: Lenders will often require at least two years of operating history and good business credit.
  • Personal Guarantee: Many lenders will require business owners to sign a personal guarantee, which makes the individual personally liable if the business defaults.
  • Property Type and Use: Residential rental properties are more lender-friendly than mixed-use or purely commercial properties, which can be riskier.
  • Down Payment: Business mortgages typically require a larger down payment—often 20% to 35%—compared to personal residential loans.
  • Cash Flow and Financial Documentation: Profit and loss statements, tax returns, bank statements, and operating agreements are often required to prove the LLC’s financial viability.

These requirements mean that even though an LLC can get a mortgage, not every business will qualify.

Common Mortgage Options for LLCs and Businesses

While traditional residential loans are not typically available to LLCs, several alternative loan types are accessible to business entities:

  • Commercial Real Estate Loans: These are designed for purchasing properties intended for business use and are usually provided by banks or credit unions. They often have shorter terms (5–20 years) and higher interest rates.
  • Portfolio Loans: Issued by lenders who hold the loans in their own investment portfolios rather than selling them on the secondary market. These loans offer flexibility in underwriting criteria and can be customized to your business’s financial profile.
  • Asset-Based Loans: Focus on the value of the property rather than the borrower's credit history, making them useful if your business has limited credit history but significant assets.
  • Hard Money Loans: Short-term loans provided by private lenders based on the property’s value. These are useful for flipping or fast-close situations but come with higher interest rates and fees.

Each option comes with its own pros and cons, and the right fit depends on your business’s financial situation, intended property use, and long-term strategy.

Obtaining Mortgages for Rental Properties

If you're considering making real estate investments, there are a few things you need to take into consideration:

  • Understand your limits in terms of available lending options.
  • Consider research lenders who are considered investor-friendly.
  • Credit requirements become stricter when you have many loans.
  • You'll need to make sure you have plenty of working cash.

Fannie Mae only allows you to have up to 10 loans at any given time. Working with a good lender can help you build a strategy to make sure you're taking full advantage of this limit. In most cases, a bank won't give you more than four loans at a time. You may have to conduct research to find lenders who will allow you to carry as many as 10 at a time.

When you're planning to purchase rental properties, it's important to build a good team. An important part of building that team is choosing the right lender. Working with mortgage brokers is fine if you're looking for help to find a house for yourself. If you're working on building up a portfolio comprised of rental properties, however, it's best to work with direct lenders.

Working with brokers means giving up an element of control in the borrowing process. Underwriters have been known to change the standards regarding lending during escrow or choose to pull out of a deal unexpectedly. When you choose to work with direct lenders, however, you have more influence over these decisions. It's important to ask a few quick questions before choosing a lender:

  • Are you working with any investors right now?
  • How many loans are you able to offer to investors?
  • Do you own any of your rental properties personally?

Many people don't know this, but there are actually two different guidelines used to qualify credit for investors seeking a loan:

  • If you currently have one to four loans, you'll need a credit rating of 630 or higher
  • If you currently have five to 10 loans, you'll need a credit rating of 720 or higher to obtain additional loans

You're going to need to make sure you have enough cash available to make a down payment on a new loan as well as an available cash reserve for up to six months for every property on which you have outstanding loans. This isn't a suggestion and is actually a requirement for most lenders.

Tips for Improving Your Approval Chances

If you're asking, "can you get a mortgage through a business?" here are steps to boost your eligibility:

  • Build Business Credit: Open business credit accounts and pay them off reliably to establish your LLC’s creditworthiness.
  • Maintain Strong Financials: Keep organized records of income, expenses, and tax filings. Profitability can go a long way in convincing lenders.
  • Use a Business Bank Account: Keeping personal and business funds separate adds credibility to your application.
  • Prepare a Solid Business Plan: Lenders want to understand your long-term strategy for the property—especially if it’s rental or commercial.
  • Work with Specialist Lenders: Some banks and credit unions cater specifically to real estate investors or small business borrowers.

Getting a mortgage through a business is possible, but preparation and documentation are key.

Pros and Cons of Getting a Mortgage Through a Business

Purchasing real estate through an LLC has both advantages and trade-offs. Here’s a breakdown to help you decide if it’s the right move for your situation.

Pros:

  • Asset Protection: Limits personal liability in the event of legal claims or debt collection.
  • Tax Planning: Offers flexibility in structuring income and expenses for tax efficiency.
  • Professionalism: Presents your rental activities as a legitimate business, which may benefit future investors or partners.

Cons:

  • Higher Interest Rates: Business loans tend to carry higher rates than personal mortgages.
  • Larger Down Payments: You may need to put down 20%–35%, compared to as little as 3% for personal loans.
  • Fewer Lenders Available: Not all banks offer mortgage products to LLCs or small businesses.
  • Administrative Complexity: Forming and maintaining an LLC adds compliance and recordkeeping requirements.

The decision ultimately comes down to your goals—whether you prioritize liability protection and long-term investing or short-term affordability.

Transferring Property into an LLC After Purchase

Some property owners choose to purchase a property in their personal name using traditional financing and later transfer ownership to their LLC. While this can help with asset protection, it comes with caveats:

  • Due-on-Sale Clause: Most mortgage agreements include a due-on-sale clause that allows lenders to demand full repayment of the loan if the property is transferred. While enforcement is rare, it remains a legal risk.
  • Title Transfer Costs: Recording fees, transfer taxes, and attorney’s fees may apply when transferring the deed to the LLC.
  • Insurance Updates: You’ll need to update property insurance to reflect the LLC as the new owner, which could affect premiums and coverage.
  • Lender Consent: In some cases, you can request formal consent from your lender before transferring ownership. Having an open dialogue with your lender is important to avoid breaches of contract.

If considering this strategy, consult with a qualified attorney or financial advisor to mitigate potential legal or financial consequences.

Frequently Asked Questions

  1. Can you get a mortgage through a business entity like an LLC?
    Yes, businesses including LLCs can obtain mortgages, especially for investment properties. However, the loan options and terms often differ from personal mortgages.
  2. What kind of mortgage can a business get?
    Common types include commercial real estate loans, portfolio loans, asset-based loans, and hard money loans—each with unique requirements.
  3. Is it better to buy property in your name or through an LLC?
    It depends. Buying through an LLC offers asset protection and tax planning benefits, but can result in higher rates and more stringent lending criteria.
  4. Can I transfer a mortgaged property to an LLC?
    Yes, but doing so may trigger the due-on-sale clause in your mortgage contract. Always consult your lender and an attorney first.
  5. Do I need a personal guarantee when getting a mortgage through my business?
    Often, yes. Lenders usually require a personal guarantee, especially for small or newly formed businesses without a strong credit history.

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