DSCR Loan in an LLC: Lender Rules, State Fees, Due-on-Sale

Do you need an LLC for a DSCR loan? What seven lenders say

Our pages on what a DSCR loan is and its requirements cover ratio, score and down payment. This page covers the part they do not: the entity. Below is what each lender says on its own site or in its own published guidelines, read October 10, 2026. These are the lenders’ claims, not our findings, and where a lender is silent we say so.

Three things stand out.

The guarantee threshold is the lender’s own. LendingOne’s 20% and Easy Street’s “above 25%” are not the same rule. In a three-way LLC split 40/40/20, all three sign at LendingOne; at Easy Street only two do (our arithmetic from the two stated thresholds). Easy Street’s second test, guaranties covering at least 50% of ownership, means a 20/20/20/20/20 five-way LLC has no owner above 25% and still needs three signatures (our arithmetic). Ask for the threshold in writing before you decide who goes on the operating agreement.

“Single-purpose” is barely published. Only LendingOne states a purpose test, and it is loose: a real-estate-related purpose, not one property per LLC. None of the other pages we read says the LLC must hold only the financed property. Many investors form one LLC per property anyway, but that is a liability choice for you and your attorney, not a rule we found in these lenders’ terms.

Kiavi, Lima One and RCN publish no guarantor rule on the pages we read. That does not mean there is none. Griffin, which does state one, spells out the consequence in its own FAQ: “Off your report doesn’t mean off the hook.” Its explanation is that a personally guaranteed loan can still count when you apply for other financing, and that if the loan defaults “the personal guarantee means collection activity can reach your personal credit.”

Full recourse or “bad-boy” carve-outs: what the published pages do and do not say

Commercial real estate lenders often split guaranties into full recourse and “non-recourse with carve-outs” that bite only on fraud, misapplied rent, unauthorized transfers or bankruptcy. We looked for that language at every lender above and did not find a carve-out schedule on any of their public pages. What we found:

• Easy Street’s tear sheet uses the words “Recourse Guaranty.”
• Griffin describes a personal guarantee and warns that default can reach your personal credit.
• LendingOne markets a separate scattered-site rental portfolio product as “Non-Recourse”; that is a different, larger-balance product from the single-property RentalOne guidelines quoted above.

So the answer to “is my DSCR guaranty full recourse or bad-boy only” is that the lenders’ public pages do not say. The guaranty form you will sign does. Ask for it with the term sheet, and read three things in it: what triggers personal liability, whether liability is capped at the loan balance, and whether a guarantor can be released after the loan seasons.

What the entity file looks like

Putting the lenders’ lists together, an LLC borrower should expect to supply: the articles of organization, the operating agreement showing who owns what percentage and who can sign, the EIN letter, a certificate of good standing, and a signed guaranty from each required owner. Griffin’s own document checklist says that entity purchases “frequently get delayed when borrowers forget essential items like operating agreements, good standing certificates, or fail to provide current ownership breakdowns.” Visio builds its own incumbency certificate by matching your answers to your filed documents and state records, so a mismatch between your operating agreement and the state’s record is something it will find.

The practical order is therefore: form the LLC, adopt an operating agreement that names every member and a manager with authority to borrow, get the EIN, and only then apply (our reading of the lists above). For a rental you are buying, that means the LLC should exist before the purchase contract is assigned to it. For the ratio, rent and reserve rules, see DSCR loan requirements; our lender comparison and lender legitimacy checks cover who to ask.

Kiavi pays CrowdfundedWealth a referral fee if a new borrower who clicks the button above closes a loan; Visio and Lima One do not. The table above reads the same way for all of them.

Moving a property you already own into an LLC: what the law protects and what it does not

Many readers do not buy new. They own a rental with a mortgage in their own name and want the title, and the next loan, in an LLC. The question is whether the lender can demand the whole balance when the deed moves. That is a due-on-sale clause, and two sources decide it.

The federal statute leaves it to your contract. The Garn-St Germain Act lets a lender enforce a due-on-sale clause and says its exercise “shall be exclusively governed by the terms of the loan contract,” except for the transfers listed in subsection (d). That list applies to residential property with fewer than five dwelling units and names eight transfers the lender may not act on: a junior lien, a purchase-money lien on household appliances, a transfer on the death of a joint tenant, a lease of three years or less without a purchase option, a transfer to a relative after the borrower’s death, a transfer in which the spouse or children become an owner, a transfer from a divorce or separation settlement, and a transfer into a living trust where the borrower remains a beneficiary and occupancy rights do not change. A ninth item adds whatever the regulations describe. A deed from you to your own LLC is not on the statute’s list. The regulation that implements it, 12 CFR 191.5(b), is written for a loan on “a home occupied or to be occupied by the borrower,” which an investor’s rental is not (our reading of the text; this is not legal advice).

Fannie Mae’s guide is a servicing exemption, not a right. Fannie Mae’s Servicing Guide (D1-4.1-02, version of August 13, 2025) tells servicers to process certain transfers without reviewing them, and one of them is a transfer to a limited liability company, “provided that” three things hold: the mortgage “was purchased or securitized by Fannie Mae on or after June 1, 2016”; “the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC”; and, if the transfer changes the occupancy to investment property, that change “does not violate the security instrument.” The same entry carries a warning for the next loan: the servicer must tell the borrower “that a property transferred to an LLC must be transferred back to a natural person in order to qualify for a refinance loan.” That fits Fannie Mae’s Selling Guide (B2-2-01), which says it purchases or securitizes mortgages made to borrowers who are natural persons.

What that leaves unprotected: a loan Fannie Mae did not buy or securitize on or after June 1, 2016, which includes bank portfolio loans and anything older; an LLC you do not control; and any note whose terms are tougher than the exemption. We did not read Freddie Mac’s equivalent (its guide requires a login), so check who owns your loan before you rely on the Fannie Mae text. Our DSCR versus conventional page describes this exemption in one line; the conditions above are the ones it leaves out.

Ways investors handle it, none of which we can recommend for you:

1. Ask the servicer in writing whether it will treat the transfer under the exemption or consent to it.
2. Refinance into the LLC. A DSCR loan to the LLC that pays off the personal mortgage removes the old clause from the picture (our reading), but you swap a conventional rate for a DSCR one. In the 2025 data below, the business-purpose median was 0.385 points above the rest overall; see the refinance guide for prepayment penalties.
3. Leave the title where it is and move only the cash-flow side (management, leases) into the LLC. That is a legal and insurance question for your attorney.

Seasoning after a deed into your own LLC is not published. The only seasoning rules the lenders print are plain ownership periods: 90 days for a cash-out refinance at Kiavi and at LendingOne, and “No seasoning requirement (program-dependent)” at Griffin. None says whether a recorded deed into your LLC restarts the clock. Ask whether the lender counts from your original purchase or from the recorded transfer, and get the answer in writing.

What an LLC costs in the ten biggest investor states

We ranked states by the 2025 count of originated first-lien, 1-4 unit investment-property loans in the federal HMDA file (the same data as the section below), then read each state’s own filing office. Ohio and Illinois are in the top ten, but their Secretary of State sites refused our download (Ohio showed a security check, Illinois returned “Access Denied”), so we did not use unverified figures for them. Georgia’s figures come from the 2022 edition of its fee schedule; its newer edition was also blocked.

Over ten years, the state charges alone (formation excluded, no late fees) come to $8,000 in California, $2,000 in North Carolina, $1,387.50 in Florida, $750 in New Jersey, $500 in Georgia on the 2022 schedule, $70 in Pennsylvania and $45 in New York (our arithmetic). Texas charges a franchise-tax report rather than a flat yearly fee. These are state charges only: a registered agent, an out-of-state LLC’s home-state fees, and the cost of the attorney who writes the operating agreement are extra. California’s $800 is the number that changes the decision for a single small rental: at the $235,000 median loan in our data, it is a cost you pay every year whatever the lender charges.

What the federal data says about business-purpose investor lending in 2025

A DSCR loan is business-purpose credit, so the mortgage data’s “business or commercial purpose” flag is the nearest public proxy for the entity-and-DSCR market. We used the FFIEC HMDA Data Browser’s nationwide 2025 file of originated loans (action taken 1), kept occupancy type 3 (investment property), and then limited the count to 1-4 units, first lien, closed-end and not reverse mortgages. That leaves 545,159 loans out of 624,867 originated investment-property records.

The gap is 0.385 points on all loans and 0.25 points on 30-year loans (our arithmetic), and it holds by purpose:

By state, the business-purpose share is highest in New York and New Jersey and lowest in Georgia:

Shares are our arithmetic on the counts shown. The lenders behind the flag are a mix of wholesale mortgage companies and investor-loan specialists:

How to read it, and what it cannot show:

• The flag is a purpose, not a legal form. HMDA does not tell us whether the borrower was an LLC, so 386,598 is not a count of LLC loans (our reading of the field).
• It mixes products. The medians at Kiavi (9.95%), RF Renovo (9.5%) and Loan Funder (9.25%) are far above any 30-year DSCR range, which we infer means short-term bridge and fix-and-flip loans (HMDA has no product field). Those loans pull the all-loans median up, and the gap shrinks to 0.25 points when only 30-year loans are counted. Kiavi’s 2025 filing was under Kiavi Funding, Inc.; its website footer now shows Figure Lending LLC and says Kiavi Funding LLC is a subsidiary of Figure Technology Solutions, Inc., so later data may show a different filer.
• Ten percent are exempt. Reporters excused from the field are in the third row, not in the shares of yes and no.
• It differs from our Texas count on purpose. Our Texas page counts 13,229 “DSCR-type” loans because it also requires a conventional loan, no debt-to-income ratio and a term of 30 years or more. This page uses the flag alone, so its Texas figure (33,681) is larger.
• Rates are not prices. The file has no points, fees, prepayment penalty or credit score.

What a borrower can do with this

1. Ask each lender four questions in writing: the ownership percentage that must guarantee, whether the guaranty is full recourse or limited to carve-outs (and ask for the form), whether it requires one LLC per property, and how it counts seasoning after a deed into your LLC.
2. Draft the operating agreement around the lender’s threshold. A 20% threshold and a 25% threshold put different people on the loan for the same split.
3. Price the state, not just the lender. In California the $800 yearly tax is a fixed cost to weigh against the benefit of the entity; in Pennsylvania the yearly cost is $7.
4. Do not move a mortgaged property into an LLC on the strength of a forum post. Read your note and deed of trust for the due-on-sale clause, find out who owns the loan, and take the Fannie Mae conditions above to your attorney.
5. Run the numbers first in our DSCR calculator and compare with the options in our investment-property loan guide.

FAQ

Lender terms come from each lender’s own website, tear sheet or broker guidelines, read October 10, 2026 (Kiavi, Visio Lending, Lima One Capital, LendingOne, Easy Street Capital, RCN Capital, Griffin Funding); they are the lenders’ claims, not ours, and the Easy Street sheet and LendingOne PDF carry no date. The Garn-St Germain Act is 12 U.S.C. 1701j-3 and the regulation 12 CFR 191.5, both as published by Cornell’s Legal Information Institute; the Fannie Mae text is Servicing Guide D1-4.1-02 (August 13, 2025 version) and Selling Guide B2-2-01. State fees come from the California Secretary of State and Franchise Tax Board, the Texas Secretary of State and Comptroller, the Florida Division of Corporations and Statutes, the Pennsylvania Department of State, the New York Department of State, the North Carolina Secretary of State, the Georgia Secretary of State (2022 schedule) and the New Jersey Division of Revenue and Enterprise Services; Ohio and Illinois were not read. Loan data: FFIEC/CFPB HMDA Data Browser, nationwide 2025 originated loans, downloaded October 10, 2026; filer names from the FFIEC 2025 filer list. Shares, gaps and ten-year sums are our arithmetic. This is analysis of public documents, not investment, legal, tax or lending advice.