Can I change my home's title after closing?
An alternative title to this post could be "your mortgage broker is an idiot". Unfortunately, the answer many loan officers will provide to this question is "sure you can, just wait until the loan is closed and recorded, and then change title". This answer is typically a cover up for "I don't know", or worse, "once the loan is closed I'm paid, so I don't care what you do". This is one of the worst pieces of advice a mortgage professional can provide.
The absolute, definitive answer to this question is 'maybe'. If you own the home free & clear, you should work with a title company or attorney to structure title however you'd like, but be aware that you're changing the ownership of an asset, and your actions could have tax implications. If you have a mortgage, though, it's a different story. Your mortgage company must approve any changes to the way title is held after your loan closes.
This comes up often with investors wanting to hold properties in LLC's, situtations with multiple borrowers on a loan, or with someone creatively navigating the tax code. It usually falls into the realm of "you can't have your cake and eat it, too". If you want the low rates and advantages offered by Fannie Mae or Freddie Mac, you're not going to be able to hold title in an LLC - they want YOU responsible for any issues with the loan, not your LLC. There are portfolio lenders aplenty who will close your loan in an LLC, but chances are you're going to need more equity and you'll pay a higher rate. What you can't do is close your loan in your name with a conventional loan, and then transfer title to an LLC post-close. If you do, the bank can call the loan due, and initiate the foreclosure process. Trust me, it's in the fine print.
The same can be said with quit-claim deeds. Many people believe they can add or subtract people from title as they please. Often there will be tax implications to adding or removing someone from a title, and as with transferring to an LLC, the lender can call a loan due or initiate foreclosure if a quit-claim deed was recorded without permission from the lender. If they approved a loan with 2 people holding title, then they approved the loan with 2 people being party to the responsibility for that property, not 1, so removing someone without permission violates the loans standards.
Do people change title and get away with it? Yes, they do. Lenders aren't checking deeds every 30 days to ensure nothing's changed, however, if a lender finds out title was changed from an individual borrower to an LLC, or if a quit-claim has been recorded without permission from the lender, there is likely to be signed documentation giving the lender permission to immediately initiate foreclosure. It is not worth the risk. Just because a friend or family member did it, does not mean you'll be as lucky, nor does it mean they won't eventually be called on it.
Do it the right way. Talk to your lender about the reason you want to change title and see if they will work with you. While it may be difficult to get a non-portfolio lender to make the change to an LLC, often times quit-claim deeds can be worked on with a lenders permission and executed without a problem so long as there's a legitimate reason for it and the proper steps are taken.
Need a lender with options to close in an LLC, corporation, partnership, or trust? Give me a call at 484.680.4852 for program guidelines & parameters.
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