Today, it seems to be somewhat common for someone to have a family trust set up for estate planning purposes. Family trusts are great, but when it comes to financing a home with an FHA loan, there are a few things that need to happen in order to have everything go smoothly and as it was intended.
FHA Financing For Trusts
Generally speaking, in order to be eligible for FHA financing using a trust, the borrower remains the beneficiary and occupies the property as a principal residence. Trust agreements are typically going to be required to be seen by the underwriting department and usually they will get the lenders attorneys to also review the trust (so be ready for it to take longer to close).
Eligible borrowers include:
One or more borrowers with one living trust, or Two or more borrowers with separate living trusts, or Multiple borrowers with one or more holding title as an individual and one or more holding title as a living trust.
Eligible properties include:
- 1-4 unit primary residences
- 1-2 unit second homes
FHA Financing With A Trust: What Documentation Is Required?
Although each lender may be slightly different when it comes to required documentation, at least one item that you can reasonably expect will be required is an Attorney’s opinion letter from the borrower’s attorney to the lender’s attorney verifying that:
- The trust is revocable,
- The borrower is the settler of the trust and the beneficiary of the trust,
- The trust assets may be used as collateral for a loan,
- The trustee is duly qualified under applicable law to serve as trustee and is the borrower,
Of course there are other requirements when it comes to FHA financing with a Family Trust – and because of the complex nature of these loans, you will want to be sure that you talk with a loan officer who has experience closing these.