Personal Credit Report And LLC
My investment partner and I are considering the purchase of a property in both of our names, with plans to transfer ownership of the property into an LLC. The rental income from the property will cover our mortgage payments.
Question One) I am concerned about the mortgage remaining on my individual credit report, because I would not be able to afford this property by myself, and fear that it will prevent me from making other purchases. In other words, without taking the rental income into account, it will significantly increase my debt to income ratio. Is there a way to avoid this?
Question Two) The LLC will be newly established, and from what I understand, it will not be possible to refinance or purchase the property in the name of the LLC. Is this correct?nullnull
1. Your debt to income ratio will be adversely affected by any mortgage loan in your name without any rental income to offset the debt. No, there is no way to avoid this. Even if you have an investment partner on the loan as a co-borrower, the entire monthly loan payment will be used to calculate your debt ratio -- same for your partner.
2. Not correct. A newly established LLC can take direct title to a property if you use a commercial loan. Your own credit score will be used to qualify for the loan and you will have to personally guarantee the loan, but if the loan is made to your LLC, the loan will not appear on your personal credit report.
Newkid,
Do you know any institution that actually makes these commercial loans that you described above? Please share if you can.
Thanks,
JS.
luxury mortgage will lend in the name of trusts and LLCs.
Thanks for the responses.
NewKid - the rental income will cover the mortgage. If we do get the loan in our names, do you know if I have to show an established rental history for a certain period of time (e.g. 12 months) before a lender will consider it as income?
Also, with a commercial loan, I assume we would have to put down at least 20% - correct?
Quote:
On 2008-01-08 20:41, smithj2 wrote:
Newkid,
Do you know any institution that actually makes these commercial loans that you described above? Please share if you can.My own bank, BB&T will do this. I suspect most national banks will, you just have to talk to the commercial loan officer instead of the consumer (residential mortgage) loan officer.[ Edited by NewKidInTown3 on Date 01/09/2008 ]