Loan for second rental property

[Ayyoub Reza]

Hi, 

We have one loan for my house under my name, another loan for a rental property under my wife name. So if we want to buy another rental property who do you suggest to get the loan? Myself or my wife? We have same credit score/history.  Any suggestions/opinion will be appreciated. 

Regards

[Jay Hurst]

Quote from @Erik Estrada:

Quote from @Jay Hurst:

Quote from @Erik Estrada:

Quote from @Jay Hurst:

Quote from @Erik Estrada:

Quote from @Jay Hurst:

Quote from @Erik Estrada:

Quote from @Ayyoub Reza:

Hi, 

We have one loan for my house under my name, another loan for a rental property under my wife name. So if we want to buy another rental property who do you suggest to get the loan? Myself or my wife? We have same credit score/history.  Any suggestions/opinion will be appreciated. 

Regards

You can easily structure this scenario on a DSCR based loan and have the loan guarantor with the highest score be the only person to qualify while closing in an LLC owned by you and your wife.

Rates on DSCR are nearly the same as a conventional investment property loan. Sometimes even lower depending on the DSCR ratio and LTV. Best of all is that they do not show up on your credit report.

so, if it does not show up on a credit report does the loan not exist? 

It does not mean it doesn't exist. A lot of clients like that it does not show up on their credit report. There are a few DSCR lenders (usually the ones that offer trid loans) that do have their DSCR loan show up on the borrower's credit report. Several others don't.

Understand, as I have originated DSCR loans since back when they were called investor cash flow loans, but my question is what does the fact that the loan is not showing up on the credit report make it the "best part"? and why are a lot of your clients led to believe that the credit report matters at all? I am a private lender as well lending my own funds, and I also do not report to the credit agencies, but does that mean my loan does not really matter or exist on the next application?

 Some of the clients that I work with like the ability to  have an easier time qualifying for business lines of credit, business cards, or other forms of credit that is not specifically a mortgage or real estate related. The fact that it does not report on their personal credit helps them out with other forms of financing. Especially if they have 10+ of these loans active at the same time. 

 hmm...well, as someone who has 20+ million in warehouse lines of credit I do know that it would still be fraud not to include those loans on the application/quarterly financial statements that are required for business credit. 

But, ok, sure, but you are saying that just because the loan is not on your credit report has no advantage when applying for the next mortgage correct? I have seen this stated on this board and have heard it parroted back by newbie investors, and this myth needs to end. It is (and I am sure has) created a lot of rude surprises when folks go to buy a primary home etc. Same as an LLC with a personally guarantee magically takes away the liability from the personal balance sheet as well.

 Also, 

Is that warehouse line of credit for one business you own? Or several others? Did you have to disclose those debts from one business you own to another completely different line of credit for another business? 

I’m not a credit expert by any means, but curious to know if you still have to disclose debts on a business that is completely unrelated to another business you own. 

 100% all personally guaranteed debt has to be disclosed no matter what entity uses the debt. Absolutely. And they ALL effect underwriting as well. 

[Jacob Sherman]

You are able to utilize DSCR no income no doc programs . May even want to start looking into buying them in an LLC . What is the scenario looking like for the property you're looking to purchase ?

[Bryan Martinez]

Also, something to note, a lot of lenders will tell you that. But if they do not maintain servicing rights on the backend, they cannot guarantee that. Lenders are either selling or securitizing their loans. Sold loans will typically have servicing rights sold with the loan. In those cases, a lot of these services will see a personal name or primary guarantor instead of just the business name and will automatically start reporting to personal credit. I have seen it have a ton of times. Even with securitizing your own loans and maintaining servicing, lenders are always careful to make sure there is a chance it can report. 

Not to take away from anything said before, just adding some extra insight. 

[Dave Skow]

@Ayyoub Reza- thanks -  depending on how you file your taxes - you might ask this  question to a CPA ...if you file jointly - I would recommend  you  be the buyer of the  next rental .....this would posisbly allwo you to  avoid needing the document the  rental property 

[Jacob Sherman]

Are you purchasing an investment property ? Are you going full doc or no doc ? 

[Brandon Croucier]

When it comes to rental properties, it wouldn't matter as much as to who goes onto the loan. We want to pick the best borrower, with the best FICO score so we can get you the best rate possible.

I would love to jump on a call to see how my team and I may assist you!

[Colin McMahon]

Hi Ayyoub, 

Are the bank accounts being used for the down payment held jointly or in individual names? If the accounts are shared, either one of you or both can contribute to the down payment. If the accounts are in individual names, then the person whose name is on the account will need to be on the loan.

Although you mentioned that both of you have the same credit score and history, consider who currently has more financial leverage or could benefit from additional credit activity. Sometimes, distributing loans between partners can optimize your credit utilization and impact less on individual credit scores.

Would be happy to provide additional guidance with more context - I'll send a DM!