Qualifying For Mortages After Incorporation
I'm actually thinking about starting a real estate investing business. I was trying to think through how one would get started (i.e. incorporated) and once incorporated how this entity will qualify for mortgages. If anyone can she some light, i'd appreciate it. Thanks
I'm in same boat. Mortgage brokers I have spoken with balk a bit. Their feedback is that I might have to either personally guarantee a note (which I shouldn't mind, should I, as my main concern for incorporating is asset protection and taxation, right?) or that I might have to go with a commercial mortgage (higher rate). Is this accurate feedback, or should I search further for mortgage brokers?
It has been my experience that most lenders will not loan to a corporation. Typically my clients purchase the house in their own name then transfer the property into their corporation.
[addsig]
The only problem with transferring it to your corporation after putting the mortgage in your personal name is that when you refinance it again, if ever, you will have to quit claim it back to yourself. Also, transferring it to the business does not take it off of your credit report and thus your debt to income. The other thing is getting a D&B number. You have to build up the credit of the business with things like a credit card that you personally guarantee but list under the tax id number. It will not show up on your credit.
Generally, the lenders want you to be personally liable for the debt. So the property goes f rom you to your entity.
Once you develop a track record under the entity. Once you have a decent corp. balance sheet and financial statement (2/3 years ) you can get loans in your corporate name. But, not from the get go.
Thanks for the feedback.
Hey guys I just found out some very interesting news on this topic after speaking to a broker over weekend. What I understood him to say sounds like it will solve this transfer from person to corp entity issue. I'll follow up with him this week. If interested in my findings just send me a private and I'll let you know what I find out.
Mark
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The reason Mortgage Brokers and Mortgage Bankers do not lend to corporation is it to hard to foreclose on the property if its in the corporate name.
On 2003-11-06 06:44, jpark wrote:
I'm actually thinking about starting a real estate investing business. I was trying to think through how one would get started (i.e. incorporated) and once incorporated how this entity will qualify for mortgages. If anyone can she some light, i'd appreciate it. Thanks
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On 2003-11-11 20:09, Rocks wrote:
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The reason Mortgage Brokers and Mortgage Bankers do not lend to corporation is it to hard to foreclose on the property if its in the corporate name.
I find that very curious- the property is still the collateral for the note regardless of whether it is in a corporate name or an individual's name. What the mortgage co. can't do is go after you personally for a deficiency judgement if the amount the property brings at sale doesn't cover the amount owed.
I am closing on Friday on a 4 unit building I am buying in my corporation's name. I am purchasing all cash (pulled $ from a HELOC) and am planning to refinance a few months down the road, hopefully at the appraised value (which should be a bit higher than what I bought it for). Should be interesting to see if I have any trouble doing the re-fi....
Hi arwen,
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"I am closing on Friday on a 4 unit building I am buying in my corporation's name. I am purchasing all cash (pulled $ from a HELOC) and am planning to refinance a few months down the road, hopefully at the appraised value."
A HELOC is a great method to use for corporate purchasing and then refinancing out. For those of you who do not have access to HELOC (or enough to make deals happen), seek out private money. It can truly change your business direction!
Best of Success!
BAMZ
Ok,
Here is what I found out for what its worth. Broker indicated that on residential property as long as you put down 20% and you personally quarantee loan you can close with companies name on the title. Don't know if that helps anyone but there it is.
Mark
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On 2003-11-06 09:30, ccoons wrote:
It has been my experience that most lenders will not loan to a corporation. Typically my clients purchase the house in their own name then transfer the property into their corporation.
You are an asset protection lawyer and you advise your clients to do this???
So they get a mortg in their name and then transfer title into the name of a different entity (corp) and yet the mort is still in their name.
What state do you live in where this is not considered fraud by the lending institution?[ Edited by MrMike on Date 11/26/2003 ]