"Can I Get a Mortgage on a Home Held in a Land Trust? The Conditions a Lender Checks"

The seller line on the purchase contract does not name a person. It names a bank, followed by the words "as trustee under a trust agreement" and a trust number. The home you love is held in a land trust, and the seller's attorney has asked whether you plan to keep it that way after closing.

Yes. A lender can make a conventional loan on a home held in a land trust when you are a beneficiary who qualifies on your own. Freddie Mac adds five more conditions. The state has to permit land trusts by statute, and every beneficiary has to be an individual. The trustee has to be a company in that business. The home has to be the trust's only asset, and it has to be a primary residence, second home or investment property. You also sign a collateral assignment of your beneficial interest.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. A land trust brings a trust company and your attorney into the closing, and it helps to have all of them working on it from the week you apply.

Every condition below comes from Freddie Mac's Seller/Servicer Guide, Section 5103.6, Land Trust, revised July 2, 2025, so you can read the wording yourself.

What is a land trust, and how is it different from a living trust?

In a land trust, a trustee holds the legal title to the home. You, as a beneficiary, hold the beneficial interest, which carries the rights to the property and the power to tell the trustee what to do with it. Freddie Mac calls that last right the "power of direction."

A revocable living trust is an estate planning document, usually set up by the person who is also its trustee, and Freddie Mac handles it under a separate section, 5103.5. You cannot swap one set of rules for the other. If yours is a living trust you created, my article on buying a home in a revocable living trust covers that path.

Two ways a land trust shows up on a purchase

The seller's trust company signs the home over to you. As trustee, it signs a deed that moves the home out of the trust, and the home goes into your own name. Your loan is then an ordinary purchase loan, and the land trust conditions below do not apply to it.

The home stays in a land trust, and you become a beneficiary. You might be setting up a new land trust to take title at closing, or the home might stay in an existing trust while the beneficial interest moves to you. Either way, the loan becomes what Freddie Mac calls a Land Trust Mortgage, and every condition in the rest of this article applies.

In Illinois, a beneficial interest in a land trust can change hands without a deed, and my article on the Illinois PTAX-203 transfer declaration explains the PTAX-203-B form that covers it. Your attorney can tell you early which structure the seller is offering.

The conditions a lender checks before lending on a land trust

The lender checks six things about the trust, the trustee, the home and you, and every one of them has to be a yes.

The state has to permit land trusts by statute

Freddie Mac says the home "must be located in a State that recognizes and permits the use of Land Trusts by statute." Your attorney and the title company confirm that for the state the home is in. Illinois is the state Freddie Mac uses for its own sample form, and it is one of the fifteen states I'm licensed in.

You are a beneficiary of the trust, and you qualify on your own

At least one beneficiary of the trust has to be on the loan. Freddie Mac says each beneficiary on the loan has to qualify on their own. The lender fully underwrites your income, assets, credit and debts as an individual.

Freddie Mac also says a beneficiary on the loan "must be deemed to be an owner" of the property. So even though the trust holds title, the lender treats you as the owner.

Every beneficiary is an individual

"All beneficiaries of the Land Trust must be individuals." A land trust with an LLC, a corporation or another trust as a beneficiary does not meet this condition, even if you personally are also a beneficiary. Other individuals can be beneficiaries without being on the loan, as long as at least one beneficiary is.

The trustee is a corporation or financial institution

The trustee has to be "a corporation or financial institution customarily engaged in the business of acting as trustee for land trusts in the applicable jurisdiction." If you, a relative or your attorney acts as trustee personally, the trust will not meet the trustee condition. The trustee on a Freddie Mac land trust loan is a company that does this work as a business where the home is located.

The home is the trust's only asset

"The Mortgaged Premises must be the only asset of the Land Trust." The trust can hold this home and nothing else.

The home is a primary residence, a second home or an investment property

Freddie Mac allows three types of property:

• A one- to four-unit primary residence, occupied by a beneficiary who is on the loan.
• A second home, occupied for some portion of the year by a beneficiary who is on the loan.
• A one- to four-unit investment property, as long as at least one beneficiary is on the loan.

Who signs the note, the mortgage and the collateral assignment?

A land trust closing has three separate signing roles.

The note. Each beneficiary on the loan signs the note "in their individual capacity." Your personal promise to repay stays with you.

The mortgage. The trustee signs the mortgage or deed of trust, because the trustee is the one holding title to the home.

The collateral assignment. Each beneficiary on the loan signs this individually. The lender accepts it, and the trust company acknowledges or endorses it in whatever way the state's practice calls for.

So on closing day, you sign the note and the collateral assignment as yourself. The trust company signs the mortgage through its own representative, so your closing attorney or the title company will want that signature arranged ahead of time.

The collateral assignment of beneficial interest pledges your rights in the trust

Each beneficiary on the loan signs this document alongside the mortgage. It gives the lender a security interest, meaning a claim that backs the loan, in three things. The first is your rights and powers in the trust. The second is the home held in the trust, including any earnings or proceeds from it. The third is the land trust agreement itself, including the power of direction.

You also confirm in writing that you have not already pledged those rights to anyone else, and you agree not to transfer any of them without the lender's written approval. The assignment is "for collateral security only," so the lender takes on none of your duties under the trust agreement, and you keep all of them.

For an Illinois home, the lender can use Freddie Mac's sample, Form 50, Collateral Assignment of Beneficial Interest in Land Trust, or another form that meets Illinois requirements. In other states, the lender uses a form that reflects that state's requirements, or Form 50 if the lender decides it fits that state.

Documents the lender will need for a land trust mortgage

Along with the usual documents for any loan, the lender needs three things for the trust. The first comes from you: when you're ready, please provide a complete copy of the original land trust agreement, all pages, please. Some states call for a summary of the agreement, known as an abstract, instead, and your attorney will know which applies.

The second is written proof that the beneficiaries who hold the power of direction have directed the trust company to sign the mortgage documents. If the trust agreement requires more than one beneficiary to give that direction, the proof has to show that enough of them did, and that can include a beneficiary who is not on the loan.

The third is the collateral assignment you sign at closing. Outside Illinois, the lender keeps the original, signed by you, the lender and the trust company. For an Illinois home, the trust company certifies a copy for the lender, and the original has to be available from the trust company if the lender asks for it.

The loan also has to be a valid first lien, meaning no other mortgage on the home comes ahead of it, and it has to be covered by title insurance. The title company issues that policy, and my article on a title problem found before closing covers what happens when it turns up an issue.

Common mistakes on a land trust purchase

Keeping an individual as trustee. A land trust with a person acting as trustee will not meet Freddie Mac's trustee condition. Changing the trustee is work for your attorney and the trust company, so this is worth settling before the contract is signed.

Mentioning the trust late. The trust company, your attorney and the title company all have pieces to deliver. A trust that comes up in the last week of the file can move the closing date.

Assuming every loan program reads this the same way. This article follows Freddie Mac's conventional guide. Fannie Mae's guide names an eligible land trust, with you as the beneficiary, as an accepted way to have bought a home in its delayed financing rule for cash purchases. Other programs have their own rules, so the program your loan uses decides which set applies.

An illustration with an invented purchase

Names and details below are invented to show the sequence, and none of it is a real file.

Dana and Marcus are buying a two-unit home in Illinois. They plan to live in one unit and rent the other, and they want title held in a land trust, with both of them as beneficiaries.

They mention the trust at application. Their attorney sets up a new land trust with a trust company as trustee, the two of them as the only beneficiaries, and the home as its only asset. The lender reviews each of them on their own income and credit. In week one, they provide the complete trust agreement and a written direction telling the trust company to sign the mortgage documents, and the title company reviews both.

At closing, Dana and Marcus each sign the note and the collateral assignment, and the trust company signs the mortgage.

Your next step

You are welcome to run your numbers and see rates for your scenario, your debt ratio and closing costs, with no credit pull and no account. You can choose a rate option there, and that selection can change as we go.

When you are ready, getting pre-approved is where your income and assets get reviewed properly, and it is the right moment to mention the trust. If the home is in Illinois, my Illinois mortgage page covers the state's other closing details. You can also read how the process works from application to closing. If you would rather talk it through first, you are welcome to call me at (843) 765-0000.

Nothing here is legal advice, and nothing here is a loan approval, a denial or a commitment to lend. Whether a land trust is the right way for you to hold a home is a question for your attorney. Whether a particular trust meets a particular lender's requirements is a question for the lender and the title insurer.

Common questions

Can you get a mortgage on a property held in a land trust?

Yes, on a conventional loan that meets Freddie Mac's Section 5103.6. At least one beneficiary has to be on the loan and qualify individually, and all beneficiaries have to be individuals. The trustee has to be a corporation or financial institution in the land trust business. The home has to be the trust's only asset, in a state that permits land trusts by statute.

Who signs the mortgage when a land trust holds title?

The trustee signs the mortgage or deed of trust, because the trustee holds legal title to the home. Each beneficiary on the loan signs the note personally and also signs a collateral assignment of beneficial interest. The trustee then receives and acknowledges that assignment, and the lender accepts it, as Freddie Mac's Section 5103.6 requires.

What is a collateral assignment of beneficial interest?

It is the document in which a beneficiary pledges their rights in a land trust to the lender, alongside the mortgage on the home. Under Freddie Mac's Section 5103.6, it covers the beneficiary's interest in the trust, the property and the trust agreement, including the power to direct the trustee.

Can I be the trustee of my own land trust and still get a conventional loan?

Not under Freddie Mac's rules. Section 5103.6 requires the trustee to be a corporation or financial institution customarily engaged in acting as trustee for land trusts in that jurisdiction. You can be a beneficiary and qualify for the loan individually, and a qualifying trust company acts as trustee.

Can a land trust be used for an investment property or a second home?

Yes. Freddie Mac's Section 5103.6 allows a one- to four-unit investment property when at least one beneficiary is on the loan, and a second home occupied part of the year by a beneficiary on the loan.

Is a land trust the same as a revocable living trust for a mortgage?

No. Freddie Mac covers land trusts in Section 5103.6 and living trusts in Section 5103.5, with separate rules. A land trust on a Freddie Mac loan needs a corporate or financial institution trustee, holds only the one home, and comes with a collateral assignment of the beneficial interest. A revocable living trust is an estate planning document, usually run by the person who created it.