"Can I Buy a Home in the Name of My Revocable Living Trust?"

Usually yes. Fannie Mae accepts a qualifying revocable living trust as a party to the security instrument on any transaction type, so a purchase can close with the trust already holding title. What changes is paperwork rather than qualifying. The person whose credit is used signs the note individually, the trustee signs the documents that pledge the property, and the trust has to say a few specific things.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. This question usually reaches me from the attorney who drafted the trust, or from the agent holding the contract, a week or two after somebody said the home would have to come out of the trust before a loan could close on it. In most cases it does not.

Why does a lender care who holds the title?

The lender is not judging the estate plan. It is answering one narrow question: if this loan is ever in default, can the lien be enforced against this property?

When a person takes title in their own name, that question answers itself. When a trust takes title, the answer depends on the trust document. Somebody has to read it and confirm that the trustee has the power to pledge the property for a loan made to the individual, and that the trust can be undone by the person who created it. Those two facts are what make the lien enforceable, and they are what the whole review is about.

So the work is a document review, not a hurdle. The attorney who drafted the trust usually put both of those powers in it already, because a well-drafted revocable trust anticipates that the home inside it may need to be financed someday.

What makes a revocable living trust eligible on a conventional loan?

Fannie Mae's rule lives in B2-2-05, Inter Vivos Revocable Trusts in the Selling Guide, and Freddie Mac's parallel rule is Section 5103.5, Living Trust, in the Single-Family Seller/Servicer Guide. The two read differently and land in the same place. The conditions that matter most on a purchase:

• The trust is revocable. It was created during the settlor's lifetime, it took effect during that lifetime, and the person who created it can change or cancel it at any time, for any reason. The settlor is simply the person who set the trust up, which is the same person the document may call the grantor or the trustor.
• The trust has to be revocable and eligible when the loan is delivered, not only on the day it was signed. An amendment between application and closing matters, which is why the lender wants every amendment, not just the original.
• The person whose credit is used is both the settlor and the primary beneficiary. If the trust names a beneficiary, or state law requires one, the settlor is that primary beneficiary. Multiple primary beneficiaries are allowed when the settlor's income and assets are the ones being used to qualify.
• The trustee has the power to mortgage the property to secure a loan made to the individual on the note. This is the sentence the title company and the lender are both looking for.
• One or more trustees are named in the trust document to hold legal title and to manage the property. The settlor is usually a trustee, and a co-trustee is common.
• The title insurer will insure the trust without an exception. The lender is responsible for confirming, under the law of the state where the property is, that full title coverage comes through with no exception carved out for the trust or the trustees.

That last one is where the answer occasionally turns out to be no. The agency rule permits the trust, and state law and the title insurer decide whether it works on that particular property. It is the same reason a title problem found before closing is a local problem with a local fix.

None of the above touches how a file qualifies. Income, assets and debts are read exactly the way they would be if the home were going in your own name. If the trust is also where some of the money comes from, that is a separate question with its own rules, and income paid out of a trust has to be documented and shown to continue like any other income.

Who signs what when the trust is on the title?

A trust purchase produces more signature lines than a normal one, and it is worth knowing the shape of that before you see the closing package.

The note. The individual whose credit qualified the loan signs the note personally, in their own name. Personal liability for repaying the money stays with the person, not with the trust. The trustee also signs the note in connection with the trust's grant of the mortgage, and Fannie Mae permits language to be added next to that trustee signature making clear it is there only to support the trust's pledge of the property, and that the trust has no personal obligation to pay. The wording and the mechanics are in B8-5-02 and in E-2-04, Signature Requirements for Mortgages to Inter Vivos Revocable Trusts.

The security instrument. The trustee or trustees sign the mortgage or deed of trust, along with the inter vivos revocable trust rider where one is used.

The acknowledgment. Each individual who established the trust and whose credit was used has to acknowledge the terms and covenants in the security instrument and any rider, and agree to be bound by them, by signing under a statement of acknowledgment on those documents.

So the same person often signs three separate ways on the same afternoon: once as themselves on the note, once as trustee on the security instrument, and once more under the acknowledgment. That is normal, it is what the guide asks for, and it is the reason the closing package is thicker than usual. Build a little extra time into the signing appointment rather than discovering it at the table.

The exact signature blocks depend on who is serving as trustee and on how many people created the trust. The settlement agent builds those from E-2-04 and from state practice, so the useful thing to do early is make sure the settlement agent knows a trust is involved. If the signing is happening at a distance, say so at the same time, because closing on a home remotely has its own moving parts and the two questions are easier to solve together than one after the other.

What should you send the lender, and when?

Send it at application. Not after the appraisal, not once the file is nearly clear to close. The review takes a lawyer or a title officer some real reading time, and it is the one item on a purchase that has no reason to be late.

When you're ready, please provide the complete trust document, all pages and all schedules, along with every amendment and restatement that has ever been signed. We will need the trustee certification or certificate of trust that your state uses, and the full legal name and the date of the trust exactly as they appear on the signature page, because that is the name that has to match the deed and the title commitment letter for letter.

Two practical notes on that:

• Tell the lender and the settlement agent on day one that the trust will be taking title. Naming it at application means the loan is set up that way from the start. Telling anyone later means documents get redrawn, and redrawn documents move closing dates.
• Do not amend the trust in the middle of the transaction unless the attorney says it has to happen. An amendment signed two weeks before closing restarts the review, and the file has to confirm the trust still meets the revocability requirement as of delivery.

If you have not started a file yet, this is one more reason getting properly pre-approved is worth doing with the real details in front of somebody instead of typed into a form. A pre-approval that never learned about the trust is a pre-approval that has not actually been tested.

Where this gets bumpy

The name on the contract does not match the name of the trust. The purchase contract, the deed, the title commitment and the loan documents all have to name the same taker of title, spelled the same way, with the same trust date. A contract written in the individual's name and a closing that vests in the trust is a fixable mismatch, and it is a great deal easier to fix in week one than in week five.

The trust is irrevocable. The conventional path described above is for a revocable trust. An irrevocable trust is a different question with a different answer, and it is worth raising early rather than assuming the same rule applies.

Nobody read the trust. The powers are in there or they are not. When the power to mortgage the property is missing, the attorney who drafted the trust can usually amend it, and that takes time the transaction may or may not have.

The loan is not conventional. FHA, VA and portfolio products each have their own treatment of trusts, and the answer for one program does not carry to another. Ask about the specific program the file is using.

An illustration of the timing

Names, dates and figures below are invented to show the sequence, not a quote and not a real file.

Two clients buy in the same month, both with a property going into a revocable trust they set up years ago.

The first mentions the trust during the first phone call. The trust document, two amendments and the certificate of trust go over with the rest of the application package on day one. The title officer reads it in week one, confirms the trustee's power to mortgage the property and clears the coverage question. The contract is written naming the trust as the taker of title. Closing is Thursday, the signing takes forty minutes instead of twenty-five, and nothing about the trust ever becomes a story.

The second mentions it eleven days before closing, when the settlement agent asks how title is being taken. The trust has to be read, the purchase contract names the individual, the deed and the loan documents have to be redrawn, and one amendment turns out to be missing a page. All of it is solvable, it takes nine days, and the closing moves by a week.

Same trust structure, same programs. One conversation on day one separated them.

What to do now

If a trust is going to hold title, say so before anything else happens. That single sentence at application is most of the work.

Price your scenario with no credit pull, no account and nobody calling you, so the numbers are in front of you first. Then bring the trust document and the amendments when the file opens, and we can set the loan up correctly the first time. If you want to see the order the rest of it runs in, how the process works from application to closing lays out the sequence.

Nothing here is legal, tax or estate-planning advice, and nothing here is a loan approval, a denial, or a commitment to lend. Whether a trust is the right way to hold a home is a question for the attorney who drafted it, and whether a particular trust satisfies a particular lender on a particular property is one for the lender and the title insurer. Agency guidelines change, so it is worth confirming rather than assuming.

Common questions

Can a revocable living trust be on the title when I buy a house?

On a conventional loan, generally yes. Fannie Mae accepts a qualifying inter vivos revocable trust as a party to the security instrument for all transaction types, and Freddie Mac treats a living trust as an eligible party under its own Section 5103.5. The trust has to be revocable, the person whose credit is used has to be the settlor and primary beneficiary, the trustee has to hold the power to mortgage the property, and the title insurer has to be willing to insure without an exception for the trust.

Do I have to take my home out of my trust to get a mortgage?

Usually not on a conventional loan. The more common route is to keep the trust on title and document it properly, which means handing over the complete trust document and all amendments early enough for the lender and the title company to read them. Some programs and some state or title situations do land differently, so it is worth asking about the specific loan program in front of you rather than assuming any single answer applies everywhere.

Who signs the mortgage note when a trust owns the property?

The individual whose credit was used signs the note personally and keeps personal liability for repaying the loan. The trustee also signs in connection with the trust's grant of the mortgage, and Fannie Mae permits language next to that signature stating the trust has no personal obligation to pay the amounts secured. The trustee separately signs the security instrument and any rider, and each individual who established the trust acknowledges the terms of those documents.

What documents does the lender need for a trust?

The complete trust document with all pages and all schedules, every amendment and restatement that has been signed, and the trustee certification or certificate of trust your state uses. The lender also needs the exact legal name of the trust and the date it was created, as they appear on the signature page, because that string has to match the purchase contract, the deed and the title commitment. Send all of it at application rather than later.

Does putting the home in a trust change how I qualify for the loan?

No. Income, assets, credit and debt are reviewed the same way they would be if the property were being taken in your own name, because the person on the note is still the person being underwritten. Only the closing documents and the signatures change. If money coming out of the trust is part of the picture, either as income or as inherited funds used for a down payment, that part gets documented under its own rules.

Can an irrevocable trust hold title on a financed purchase?

It is a different question with a different answer, and the conventional rule described above is written for revocable trusts. An irrevocable trust usually needs a conversation with the lender and the attorney before a contract is written, because the options narrow and the program choices narrow with them. Raise it early, while there is still room to structure the purchase around the answer.