LLCs, or limited liability corporations, are entities set up by small businesses to separate business holdings from personal holdings. Often these are set up to protect a consumer's personal assets in case litigation is brought against his or her business. Setting up a mortgage through an LLC can be challenging, but is not unmanageable.
Determine whether you want to personally guarantee the mortgage loan through the LLC. This may be necessary depending on how long your business has been established as an LLC. Many commercial lenders will not finance an LLC strictly on business credit unless said business has a longstanding and positive credit history. Personally guaranteeing the LLC loan is essentially taking out a private loan -- you are as obligated and responsible for the loan as your LLC.
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Gather the necessary paperwork and do a rudimentary analysis of your business. Be honest and pretend you are a lender. For example, if you are seeking a $200,000 mortgage -- in which the payments are $1,200 per month -- and your business alone brings in about $2,000 in net revenue, a lender will most likely turn down your application. This would leave your DIR (debt to income) ratio at 60 percent -- well above most lenders' guidelines. Make sure to collect any and all business loan documentation you've obtained in the past -- especially if these loans were paid on time and in full by the end of the loan.
Research lenders. Multitudes of commercial lenders are willing to finance properties held in LLCs. The best place to start is within the business community. Find colleagues who've used commercial lenders and seek recommendations. Try to stay local. Once you've narrowed it down to a few lenders, be sure to check the Better Business Bureau to make sure the companies have clean records. See the Resources section for a link to the BBB.
Contact your accountant for all documents relating to your LLC and corporate returns. These will be required by any commercial lender. The longer the history of your LLC, the better your chances at obtaining financing. You'll have an especially good chance at obtaining financing if you've had previous properties financed through your LLC. Bring all documents listed in the "Things You'll Need" section to your first meeting with lenders.
Stay abreast of the loan process. Make sure to review all documents and terms with the lender if anything changes -- for example, after an appraisal or title search -- in the course of the loan. Be sure to obtain copies of final loan terms before you close and review them with your accountant and attorney. Be prepared to offer a personal guarantee if your loan is denied strictly on the basis of your business and LLC.
Things You'll Need
Business financial records
Business bank statements (if applicable)
Personal income documents