Aspirational Victorian TIC home in San Francisco.

Guide to Financing a TIC Purchase in California

Q: What is a Tenants-in-Common or TIC property?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: How is a TIC loan different from a standard mortgage for a condominium?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: Are interest rates for TIC loans typically higher?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What types of lenders offer financing for TIC purchases?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: What special documents are needed to apply for a TIC loan?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: Can you use a conventional or FHA loan for a TIC purchase?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: What is the key risk difference between group and individual TIC loans?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

October 12, 2026

TL;DR

TIC financing requires specialized 'fractional loans', not standard mortgages available from most national banks.
Lenders in San Francisco and Oakland have specific underwriting criteria for these unique ownership structures.
Understanding the TIC agreement, co-owner responsibilities, and loan risks is critical before buying property.

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

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David Ghazaryan

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What is a Tenants-in-Common or TIC Property in San Francisco?

A Tenants-in-Common, or TIC, arrangement is a unique form of property co-ownership popular in competitive real estate markets like San Francisco. Instead of buying a legally distinct unit like a condominium, you purchase a percentage share of an entire multi-unit property. This share gives you the right to exclusively occupy a specific unit, as detailed in a private contract known as the TIC Agreement.

This agreement is the bedrock of the entire structure. It’s a legally binding document that outlines the rights and responsibilities of each co-owner, including:

Exclusive Use Areas: Clearly defines which owner has the right to use which apartment, parking space, or storage area.
Common Areas: Details the shared use of spaces like hallways, laundry rooms, and yards.
Financial Obligations: Specifies how property taxes, insurance, and maintenance costs are divided, usually based on ownership percentage.
Rules and Governance: Establishes procedures for making decisions, handling disputes, and selling an individual owner's share.

In high-cost cities, TICs often serve as a more affordable entry point into homeownership. A two-unit building in Oakland that might be too expensive for one buyer can become accessible when two buyers purchase fractional shares together.

How is a TIC Loan Different From a Standard Condominium Mortgage?

The fundamental difference between a TIC loan and a standard condo mortgage lies in the collateral—what the bank can claim if you default. This distinction impacts every part of the lending process, from lender availability to underwriting requirements.

Condominium Mortgage: When you buy a condo, you are purchasing a legally recognized, separate piece of real estate. Your mortgage is secured only by your individual unit. The lender’s risk is contained within that defined space. If your neighbor defaults, it has no direct impact on your loan.
TIC Loan (Fractional Loan): A TIC loan is secured by your undivided fractional interest in the entire property. The bank isn't lending against 'Unit A'; it's lending against your 35% ownership stake in the whole building. This is a more complex and perceived riskier proposition for lenders for several reasons:
1. Shared Collateral: Your loan is tied to a property with other co-owners and their own separate loans. The lender must be comfortable with the entire property's financial health.
2. Lack of Secondary Market: Lenders cannot sell these loans to large entities like Fannie Mae or Freddie Mac. They are 'portfolio loans', meaning the lender must keep them on their own books for the life of the loan. This drastically shrinks the pool of available lenders.
3. Complex Underwriting: The lender must approve not only you as a borrower but also the property itself, the other co-owners, and the TIC Agreement. They will scrutinize the agreement to ensure it protects their interests and provides a clear path for foreclosure on a single share if necessary.

Comparison of TIC and Condo ownership structures

What Are Fractional Interest Rates and How Do They Compare?

Fractional interest rates are the specific rates charged for TIC loans. Because these are specialized portfolio loans with higher perceived risk and administrative complexity, their interest rates are typically higher than those for conventional condominium loans.

You can generally expect a fractional interest rate to be 0.25% to 0.75% higher than the rate for a comparable conventional 30-year fixed-rate mortgage. (The data, information, or policy mentioned here may vary over time.) This premium compensates the lender for the unique risks they are taking on.

Realistic Rate Example

Let's assume the prevailing rate for a 30-year fixed conventional mortgage for a prime borrower is 6.75%. For a TIC purchase in San Francisco with a similar financial profile, the borrower might be quoted a rate between 7.00% and 7.50%. While it seems small, this difference adds up significantly over the life of the loan. (The data, information, or policy mentioned here may vary over time.)

Several factors influence your specific fractional rate:

Down Payment: A larger down payment (20% or more) reduces the lender's risk and can help you secure a better rate.
Credit Score: As with any mortgage, a higher Credit Score demonstrates financial responsibility and leads to more favorable terms.
The TIC Agreement: A well-drafted, clear, and comprehensive agreement can give lenders more confidence in the property and its co-owners.

Who Are the Primary Lenders That Finance TIC Purchases in Oakland?

The list of lenders offering individual fractional loans for TIC purchases is short and highly localized. You will not find these products at large national banks like Bank of America or Chase. Instead, the market is dominated by a select group of institutions that have developed expertise in this niche.

In markets like Oakland and San Francisco, the primary sources for TIC financing are:

Local and Regional Banks: Certain California-based banks have created dedicated TIC loan programs because they understand the local market dynamics.
Credit Unions: Some community-focused credit unions offer fractional loans as part of their portfolio lending services.
Specialized Mortgage Brokers: This is often the best route for a buyer. An experienced mortgage broker who specializes in TIC financing has established relationships with the few lenders who offer these loans. They understand the specific underwriting requirements of each institution and can navigate the process efficiently, saving you the immense difficulty of trying to find these lenders on your own.

Working with a professional who knows the landscape is crucial. They can correctly package your application and present it to the right lender, increasing your chances of a smooth approval.

What Special Documents Are Needed for a TIC Loan Application?

Applying for a TIC loan requires all the standard documentation of a regular mortgage, plus a set of documents specific to the co-ownership structure. Lenders need to evaluate the entire property's viability, not just your personal finances.

Be prepared to provide:

Standard Financial Documents:
- Recent pay stubs
- Two years of W-2s and/or tax returns
- Bank and investment account statements
- Credit report authorization
TIC-Specific Documents:
- The Fully Executed TIC Agreement: This is the most important document. The lender's legal team will review it thoroughly.
- Property Operating Budget: A detailed budget showing projected income (if any), monthly HOA-style dues from each owner, and all expenses (property taxes, insurance, maintenance, utilities).
- HOA Financials: This includes the building's reserve fund balance and financial statements.
- Master Property Insurance: Proof of insurance covering the entire building for liability and replacement cost.
- Preliminary Title Report: A report for the entire parcel showing ownership, liens, and encumbrances.
- Leases: Copies of any existing leases if any of the units are rented.

Required documents for a TIC loan application

Can I Use Federal Housing Administration or Conventional Financing for a TIC?

No, you cannot use government-backed or conventional financing for a standard fractional TIC purchase. The guidelines for these programs are incompatible with the fractional ownership structure.

FHA, VA, and USDA Loans: These government-insured loan programs are designed to finance the purchase of a single, legally defined property. They do not have provisions for lending on an 'undivided fractional interest' in a larger property. The collateral simply does not meet their strict requirements.
Conventional (Fannie Mae & Freddie Mac) Loans: The reason the TIC lender pool is so small is that these loans are considered 'non-conforming'. Fannie Mae and Freddie Mac, the government-sponsored enterprises that buy most of the mortgages in the U.S., will not purchase fractional loans. Their charter and operational guidelines require loans to be secured by whole, legally distinct properties. Without the ability to sell the loan, the originating bank must hold it, limiting how many such loans they can make.

How Does Converting to a Condominium Affect My San Francisco TIC Loan?

Many TIC groups in San Francisco and other California cities enter into the arrangement with the long-term goal of converting the property to condominiums. A condo conversion is a legal process that dissolves the TIC and creates separate legal parcels for each unit, which can then be owned and sold individually.

When a condo conversion is successfully completed, your TIC loan becomes obsolete. Here’s the process:

Pay Off the TIC Loan: The fractional loan secured by your share in the TIC must be paid in full.
Refinance into a Conventional Mortgage: You will replace your TIC loan by refinancing into a new, standard condominium mortgage. This new loan will be secured by your newly created, legally separate condo unit.

This is a major benefit of the conversion process. Once you have a condo, you gain access to the entire mortgage market. This means you can shop for a new loan from hundreds of conventional lenders, potentially securing a much lower interest rate and more favorable terms than you had with your specialized fractional loan.

What Are the Risks of Financing a TIC With Group Loans Versus Individual Loans?

Understanding the difference between group and individual TIC financing is critical, as it directly impacts your financial risk.

Group Loans (Blanket Mortgages)

This is an older, far riskier structure that is rarely used for new purchases today. In a group loan:

There is one mortgage for the entire property.
All co-owners are on the loan and are jointly and severally liable for the entire debt.
If one owner fails to pay their portion of the mortgage, the other owners must cover the shortfall. If they cannot, the lender can foreclose on the entire building, and every owner could lose their home and equity, regardless of whether they were current on their payments.

Individual Loans (Fractional Loans)

This is the modern, accepted standard for TIC financing in San Francisco and Oakland. In this structure:

Each co-owner obtains their own separate loan for their individual share.
Your loan is secured only by your fractional interest.
If a co-owner defaults on their loan, the lender can only foreclose on that owner's share. It does not trigger a default on your loan or put your ownership at risk.

Modern individual fractional loans are designed to insulate responsible owners from the financial difficulties of their neighbors, making TIC ownership a much safer and more viable option than it was in the past. Navigating the world of TIC financing requires expert guidance. If you're considering a TIC purchase in San Francisco or Oakland, connecting with a mortgage specialist who understands the nuances of fractional loans is the most critical first step to ensure a successful and secure investment.

If a TIC property seems like the right path for your homeownership goals, understanding your financing options is the next crucial step. Connect with specialists who navigate these complex loans daily. Apply now to see where you stand and get the expert guidance you need.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.