Can You Use a Trust to Qualify for a Mortgage in Utah?
Yes. Owning property in a revocable living trust does not disqualify you from getting a mortgage in Utah, and trust income can be used to qualify in many situations. Most lenders are familiar with trust ownership, and the process — while slightly more involved than a standard application — is manageable with the right documentation.
Where people run into trouble is not the law, but the paperwork. Lenders need to verify that the trust meets their underwriting guidelines, that the borrower has the authority to encumber the property, and in some cases that the trust structure meets agency requirements set by Fannie Mae, Freddie Mac, or the FHA. Understanding what lenders are looking for makes the process much smoother.
Why This Comes Up
Many Utah homeowners hold their primary residence in a revocable living trust as part of their estate plan. When they go to refinance or purchase a new property, the lender sees the trust on title and needs to work through its guidelines before proceeding.
The same issue arises when someone wants to use income distributed from a trust — either their own trust or one they are a beneficiary of — to qualify for a mortgage. Trust income is treated differently than W-2 wages, and lenders apply specific documentation requirements before counting it.
Neither situation is a barrier to getting a loan. Both require a bit more legwork.
Mortgages on Property Held in a Revocable Living Trust
For conventional loans sold to Fannie Mae or Freddie Mac, property held in an inter vivos revocable trust is eligible collateral as long as specific conditions are met. The borrower must be both the grantor and a trustee of the trust, or at minimum must have the power to revoke the trust and the right to occupy the property. The trust must be revocable during the borrower's lifetime.
Lenders will typically require a copy of the trust instrument or a certification of trust. The certification of trust — available under Utah Code § 75B-2-1013 — is a summary document that confirms the trust's existence, identifies the trustees and their powers, and establishes that the trust is revocable, without disclosing the full text of the trust. Most lenders accept it in lieu of the full trust document, though some will ask for the complete instrument regardless.
The deed of trust (Utah's equivalent of a mortgage) must be executed by the trustee in their capacity as trustee, not individually. If there are co-trustees, both typically need to sign. The lender's title company will review the trust to confirm that the trustee has the authority to encumber the property — a standard power that any well-drafted revocable trust expressly includes.
For FHA and VA loans, the requirements are similar but involve an additional step: the lender must confirm that the trust meets HUD or VA guidelines, which include most of the same conditions as Fannie Mae's inter vivos trust requirements. The process takes a little longer but is routinely completed for qualified borrowers.
Using Trust Income to Qualify
Trust income — distributions received from a trust in which you are a named beneficiary — can be counted as qualifying income for mortgage purposes, but lenders apply a higher documentation standard than they do for employment income.
Fannie Mae's guidelines generally require that trust income be expected to continue for at least three years from the date of the mortgage application, that it be supported by a copy of the trust agreement confirming the income terms, and that it be documented with at least two years of tax returns or trust account statements showing consistent distributions.
The continuity requirement is the most common sticking point. If the trust gives a trustee discretion over whether to make distributions — which many trusts do — a lender may be unwilling to count that income as reliable. Income that is mandatory under the trust terms, or that has been paid consistently over a documented period, is on much stronger footing.
A letter from the trustee confirming the income, its source, and its anticipated continuation strengthens the application significantly. Some lenders will also want a CPA letter confirming the income's tax treatment, particularly if distributions carry out distributable net income that affects the borrower's tax liability.
Temporary Transfers Back to Individual Name
In some cases, particularly for FHA loans, a lender may ask the borrower to temporarily transfer the property out of the trust and back into their individual name for the closing, then re-transfer it into the trust after the loan closes. This is a workable solution but involves two additional deed recordings and the associated county recorder fees.
If a lender requires this approach, the re-transfer into the trust should happen promptly after closing — ideally within 30 days. Leaving the property in individual name after closing defeats the purpose of the trust for probate-avoidance and incapacity planning, and it means the property would need to go through probate again at the owner's death.
Cutler Riley handles both the transfer out and the re-transfer back as part of its deed recording and trust funding services, so clients do not need to manage the paperwork on their own.
What to Bring to Your Lender
If you are financing or refinancing property held in a trust, the documentation your lender will most commonly need includes a certification of trust or copy of the trust agreement, evidence that the property is titled in the trust (typically a copy of the recorded deed), confirmation that the trustee has authority to encumber the property, and if co-trustees are named, confirmation of how the trustees are authorized to act — jointly or independently.
Preparing this documentation before your lender asks for it moves the process along faster and signals to the underwriting team that the trust is properly structured.
Frequently Asked Questions
Will my lender require me to take the property out of my trust to refinance?
It depends on the loan type and the lender. For conventional loans meeting Fannie Mae or Freddie Mac guidelines, the property can typically remain in the trust throughout the transaction. For some FHA loans, lenders may require a temporary transfer. Ask your lender early in the process which approach they require.
Can my trust be the borrower on a mortgage?
For most residential mortgages, no. The individual borrower qualifies based on their personal income, credit, and assets. The trust holds title to the property, but the mortgage obligation is the borrower's personal liability. Commercial loans have more flexibility on this point.
My spouse and I are co-trustees. Do we both need to sign the loan documents?
If the trust requires co-trustees to act jointly — which many do — then yes, both trustees will need to sign the deed of trust and related loan documents. Review your trust's trustee authority provisions to confirm.
What if I am a beneficiary of someone else's trust and receiving distributions from it?
Distributions from a third-party trust can qualify as income under Fannie Mae's guidelines if the income is documented, consistent, and expected to continue for at least three years. The trust agreement and two years of distribution history are the starting point. A letter from the trustee confirming the distribution terms will also help.
Does holding property in a trust affect my property taxes?
No. Transferring your primary residence into a revocable living trust does not affect your property tax assessment, your eligibility for the primary residence designation under Utah property tax rules, or any exemptions you currently receive. The beneficial ownership has not changed — you still own and occupy the property. The trust is simply the legal title holder.
If you own property in a trust and are navigating a mortgage transaction, or if you want to make sure your trust is structured to work smoothly with future financing, Cutler Riley, PLLC can help. We offer a free consultation for Utah residents. Schedule yours here.