The Quick Read: Fannie Mae will not lend to an LLC, but it will refinance a rental an LLC owns, as long as the property is deeded into your personal name before the loan funds. Time the LLC held the property can count toward the ownership test, and the finished loan is a personal obligation. A DSCR loan works differently because it is reviewed on the property’s rent and can often close in the entity’s name.
- Fannie Mae lends to individuals only, so title must leave the LLC before closing.
- Time held by a borrower-controlled LLC can count toward the six-month ownership test.
- An existing first mortgage must also be at least 12 months old.
- Moving title out and back in can trip a due-on-sale clause on any existing loan.
- DSCR cash-out through select lenders in Lendmire’s network tops out around 75% LTV on a standard rental and keeps the LLC in place, subject to lender program eligibility. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Many investors hold rentals in an LLC for liability reasons, then find out that the agency channel does not care. This explainer walks through how that channel treats an LLC-held rental, step by step. It also covers the variations, the places where the rule gets murky, and the point where a different loan type makes more sense.
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What Does Fannie Mae Actually Say About LLC-Held Properties?
Fannie Mae buys loans made to natural persons, meaning real individuals rather than companies. Its archived borrower-eligibility rules say a borrower establishes ownership by signing the note and security instrument and by taking title in the individual’s name. An LLC cannot sit in that seat.
So why does an LLC-held rental even come up? Because the Selling Guide’s cash-out refinance section gives a path. At least one borrower must have been on title for six months before the new loan is disbursed. If a borrower-controlled LLC owned the property before closing, the LLC’s holding time may count toward that six months. The guide’s wording is “majority-owned or controlled” by the borrower.
The catch sits right beside that allowance. To close, ownership must be transferred out of the LLC and into the individual borrower’s name. The LLC can help you clear the clock. It cannot be on title when the loan funds.
Key Terms Defined
Cash-out refinance: a new loan that pays off the old one and hands you the extra equity as cash.
Seasoning: the waiting period a lender wants between two events, usually buying a property and refinancing it.
Natural person: a real individual, as opposed to a company, LLC, or partnership.
Limited cash-out refinance: a refinance that pays off the old loan and costs with little or no cash back. It follows different ownership rules from a full cash-out.
Delayed financing: an exception that lets a buyer who paid cash take cash back soon after purchase, without waiting out the full ownership clock.
Due-on-sale clause: a mortgage term that lets the lender demand payoff if the property transfers to someone else.
DSCR (debt service coverage ratio): a rental’s income compared with its full monthly payment of principal, interest, taxes, insurance, and any HOA dues. It is built for rentals, so it reads the property rather than your paycheck.
How Underwriting Treats an LLC Rental, Step by Step
Here is the sequence, in the order a file actually moves.
1. Confirm you control the LLC. The guide says majority-owned or controlled. Some practitioner write-ups claim you must own 100%. The guide’s own language is broader, so treat the 100% claim as unsupported. Still, expect your lender to ask for the operating agreement.
2. Measure the clock. Six months on title before the new loan’s disbursement date, with LLC time counting. The clock runs to disbursement, not to application. Plenty of investors assume otherwise.
3. Check any existing first mortgage. If you are paying one off, it must be at least 12 months old. That age runs from the old note date to the new note date. This is a separate test from the ownership clock.
4. Deed the property from the LLC to yourself. This is a recorded deed that happens before closing. Matching your hazard insurance and title policy to the vesting name at each step is a detail worth raising with your title company early.
5. Underwrite you personally. Expect conventional rules: personal income verification, rental income documentation, an appraisal, and credit and debt-to-income review. Your traditional personal-income documentation becomes the story, not the property’s rent.
6. Apply the leverage cap. Fannie Mae’s Eligibility Matrix shows 75% as the investment-property cash-out limit on a one-unit property. Limits for two-to-four-unit properties can differ, so confirm the current matrix before you plan around a number.
7. Count your financed properties. Borrowers with several financed second homes or investment properties face added reserve requirements. The same matrix covers this.
8. Clear the other cash-out conditions. A property listed for sale must be off the market by disbursement. And a file with a DTI above 45% on automated underwriting needs six months of reserves. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Most files that fall apart do so at steps 3 or 4. The existing loan is too young, or the investor never planned for the deed.
Which Path Are You On?
Your starting situation decides which rule matters most.
| Starting situation | What the rule means | Main risk |
|---|---|---|
| LLC bought with a mortgage | LLC time counts; the old loan must be 12+ months | Due-on-sale on deed out |
| LLC bought with cash | Possible delayed-financing exception | Fit for LLC purchases is unclear |
| You deeded it into the LLC | Your prior personal time may count | Same due-on-sale risk |
| Property held in a trust | Trust time can count if you are primary beneficiary | Trust terms matter |
The cash-purchase row deserves a flag. The delayed-financing exception lets someone who bought within the past six months take cash out if the purchase was arm’s-length, the funds are documented, and a title search shows no liens. The cash taken out cannot exceed your documented initial investment plus closing costs. Whether a LLC’s cash purchase fits that exception cleanly is a question to raise with your loan officer before you rely on it.
Cash-Out vs. Limited Cash-Out: Don’t Blur Them
The two programs carry different title rules, and people mix them up. A limited cash-out refinance generally requires a borrower on the new loan to be on title at application. The limited cash-out section carves out one exception: a borrower who is obligated on the loan being paid off but not on title, including where a majority-owned or borrower-controlled LLC holds the property. Ownership must still move into the individual’s name.
Lender channel notices have at times said LLC-held properties do not meet the limited cash-out ownership requirement. That is a real tension with the current guide text. When the two conflict, the current Selling Guide controls, but your lender’s own overlay decides what they will actually accept. Ask before you pay for an appraisal.
Where the Rule Gets Risky
The due-on-sale trap. Federal law shields certain transfers from due-on-sale enforcement. It does not clearly shield transfers of mortgaged property into an LLC. The federal statute governs due-on-sale clauses, and estate-planning commentary notes there is no federal protection for an owner-landlord’s transfer into an LLC. The exposed step is usually the transfer back into the LLC after the new loan funds. One practical fix is getting the lender’s written approval first. This is a legal-risk point, so take it to an attorney.
The exposure window. While title sits in your name, the property is outside the LLC. A liability claim in that window can reach you directly. Some investors accept that for a short period. Others decide the trade is not worth it.
Personal liability stays. On an agency loan, you are personally on the note. Deeding the property back into the LLC does not remove that obligation.
Financed-property count. Once the loan is in your name, it counts toward your limit on financed properties. Fannie Mae’s limit for second homes and investment properties is 10 through automated underwriting, with added reserves as the count climbs. Heavy portfolios hit that ceiling fast.
Why Investors Disagree About This
Investors split on the deed-out, refinance, deed-back route. Some do it routinely. Others call it risky because of the due-on-sale clause. Both camps are describing something real. The sequence is common, and the exposure is also real. It is a business decision, not a settled legal answer.
When the Agency Route Doesn’t Fit
If you want the property to stay in the LLC, the agency channel is working against you. Look at what the agency path costs an LLC-held rental: a deed round trip, traditional personal-income review, personal liability, and a lower leverage cap than a primary residence gets. That is a lot of friction for a rental that already stands on its own income.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Across Lendmire’s wholesale network, select lenders will lend to an LLC borrower, subject to lender program eligibility, usually with a personal guarantee from the principals. Guarantee thresholds vary by lender, so ask what ownership share triggers one.
Here is how the two paths compare in practice.
| Factor | Agency cash-out | DSCR cash-out |
|---|---|---|
| Borrower | Individual only | Individual or LLC |
| Title at closing | Must be personal | Can stay in the LLC |
| Qualification | Personal income and DTI | Property rent vs. payment |
| Cash-out LTV | 75% on one-unit investment | Around 75% on standard rentals |
| Personal liability | Yes | Typically a guarantee |
The network figures for DSCR cash-out are these. LTV tops out around 75% on a standard rental across most of the network. About six months of ownership, measured from title recording, is the common seasoning expectation. Coverage of 1.00 is where select programs start, and stronger ratios open better pricing and leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. No-ratio structures are available only through select lenders, generally for borrowers who already own a primary residence.
Credit is flexible by comparison. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest tiers. Reserves commonly run about six months of PITIA (principal, interest, taxes, insurance, and association dues) and step up to about nine months above $1,500,000. Standard loan sizes reach $3,000,000. Short-term rentals run lower, with cash-out at 70% LTV on STR collateral, a 640+ score, and about 12 months of hosting history.
A larger equity cushion can lower the payment and lift the ratio, but it never erases leverage caps, credit floors, or reserve rules. And clearing 1.00 does not mean positive cash flow. Repairs, vacancy, management, and capital expenses sit outside the calculation.
Property type matters too. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in these DSCR programs. Everything above is subject to lender guidelines, and each file is underwritten individually.
A Worked Walk-Through
Picture an investor with a duplex held in an LLC, bought with a bank loan more than a year ago. The deed out is possible on the timing: the LLC’s hold time counts, and the old loan is past 12 months. But the existing mortgage likely has a due-on-sale clause, and the investor wants the LLC to stay on title. The agency route works on paper and costs the investor personal underwriting plus the deed round trip.
Now run it as a DSCR file. The lender looks at rent against the full payment. Say the property clears roughly 1.2x. The investor asks for cash-out at 75% LTV or less, holds about six months of reserves, and the property stays in the LLC. The lender still reviews credit, reserves, and the property. The trade-off is that the cash-out LTV tops out around 75%, and pricing and terms depend on the file. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
This one is a genuine judgment call. An investor with strong traditional employment income, a single rental, and no attachment to the LLC may find the agency route perfectly workable. An investor with several rentals and a real liability concern will often lean toward the entity-friendly path.
Pre-Application Checklist
Ask these questions before you pay for anything.
- Does this lender accept LLC time toward ownership, and what share of LLC control do they require?
- Is my existing first mortgage at least 12 months old on its note date?
- Does my current lender’s due-on-sale clause apply to the deed out, and have I asked for written consent?
- Will they accept a transfer back into the LLC after funding?
- How does my financed-property count affect reserves?
For the seasoning side, Lendmire’s piece Fannie Mae LLC Seasoning Rules for BRRRR Cash-Out Refinance goes deeper on how the clock runs. If you want the DSCR side in full, the complete DSCR loans guide covers qualification from the ground up.
Not Legal or Tax Advice
This article is educational and is not legal or tax advice. Deed transfers, due-on-sale exposure, and LLC structure depend on your state and your documents, so consult a qualified attorney or CPA about your own situation. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Lendmire is a broker that arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
Frequently Asked Questions
Can Fannie Mae lend directly to my LLC?
No. Fannie Mae buys loans made to individuals. If an LLC holds the rental, the property has to be deeded into your name before a cash-out loan funds. The LLC’s time holding the property can count toward the ownership test, but the LLC cannot be the borrower.
Does time held in my LLC count toward the six-month requirement?
Yes, if a borrower-controlled LLC owned the property, its holding time can count. The guide’s wording is majority-owned or controlled by the borrower. The clock runs from title to the loan’s disbursement date, not to application.
What is the 12-month rule?
If you are paying off an existing first mortgage, that loan must be at least 12 months old. Age is measured from the old note date to the new note date. It is separate from the six-month ownership test, and you must meet both.
Is deeding back into the LLC after closing safe?
Not automatically. Federal due-on-sale protections do not clearly cover transfers into an LLC, so the new lender could in theory call the loan. Getting the lender’s written approval first reduces that risk. Talk to a real estate attorney about your state.
Can I keep the property in the LLC and still pull cash out?
Yes, through a different loan type. A DSCR cash-out refinance through select lenders in Lendmire’s network can keep the LLC on title, subject to lender program eligibility. Leverage tops out around 75% on a standard rental, with other terms set file by file.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines — which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B2-2-01 (archived version)
2. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
3. 12 U.S.C. § 1701j-3, Cornell Legal Information Institute
This article is part of Lendmire’s investment property cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a Cash-Out Refinance Costs Versus a Second Mortgage · Can You Get a Cash-Out Refinance After a HELOC or Family Loan Purchase? · Cash-Out Refinance Now vs HELOC Now and Refinance Later
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.