Does Closing in an LLC Affect Personal Credit or DTI?

Question

I am refinancing a BRRRR that is nearly complete. I purchased in an existing LLC I had and would like to close in the same one. I always thought that closing in an LLC meant that it wouldn't go against your personal DTI or credit. I am getting mixed answers from various lenders/ seasoned investors. Perhaps it's the underlying loan product that makes the difference. Does anyone have any more clarity on this?

For clarification, I want to close in an LLC but DO Not want it to affect my personal DTI or credit. Thank you.

Stephanie P. · Answer

I can only speak to the lenders we use.

• They do require a personal guarantee.
• They pull credit on you in the beginning and right before close to make sure you didn't file BK or get foreclosed on
• The loan does not show up on your personal credit report because the loan is to the LLC, not you.
• The loan does not affect your DTI because it is made to the LLC, not you.

Wayne Brooks · Answer

Typically yes, you’ll be signing a personal guarantee, so it will affect your credit and DTI.

Keyonte Summers · Answer

@Michael Doherty if you purchase in an LLC no but when you refinance the often want it out of the LLC this has been from my experience and communication with the lenders I have been working with.

Michael Doherty · Answer

@Benjamin Hurwitz thank you, makes sense.

@Keyonte Summers even when your purchasing in an LLC?

Mark Safrin · Answer

I presume this is an open question to all. ;)

As HMLs we always pull credit as part of the closing process. We for instance have minimum credit score of 600 to lend the full percentage of LTV we offer on short term loans. Alas, borrowers occassionaly have a lower Mid FICO than they stated/thought when completing our loan application.

For long term loans, we, for instance, have a hard minimum requirement of 650 Mid FICO for the loan to proceed.

To know your score we need to pull it.

Best wishes.

Keyonte Summers · Answer

From what I understand from talking to multiple lenders they require you to title the home in your name to do the refinance and in that case it would affect your DTI ratio.

Kyle J. · Answer

I could, but never have.  I just evaluate it based on the deal.

Caleb Heimsoth · Answer

@Michael Doherty I’ve never ran into the issue Stephanie mentioned, so it probably just varies bank by bank

Michael Doherty · Answer

@Stephanie P. hmmm... now you have me wondering what the best route is. I'd rather refi in the LLC it is in rather than in my personal. That coupled with the fact that most banks will only lend up to 70% ltv in your personal name vs the 75-80% i can get in an LLC. But if you think it will hinder me getting a primary residence in about 1-2 years I may switch it up.

Stephanie P. · Answer

Actually, that's another issue. Sometimes, commercial/investor lenders in this space will not lend to an llc if the guarantor's do not own their primary residence.

Does Closing in an LLC Affect Personal Credit or DTI?

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