I have some contacts that are willing to use their self directed 401 to lend me money to purchase some investment properties.
From what I've gathered, the terms, rates, and any other details of the loan are strictly up to the individual and myself.
The question I have is if I get a loan from this individual, will this show up on my credit report if I were to apply for a loan through a traditional bank? I'm going to be refinancing my primary home and don't want to throw off my debt to income ratio.
I'm assuming since this is essentially a private loan, that nothing is reported to anyone, other than the interest to the IRS that the individual will be making off the loan.
Thoughts? Experience from anyone?
I appreciate it!
I will defer to the banking and lending experts who I am sure will chime in... but my understanding is that when applying for your refinance you need to disclose any debts. Just because a debt may not be formally recorded does not exonerate you from this requirement.
Separately, any lender who is not having the note recorded is a fool and is not properly securing their investment.
As @Brian Eastman mentioned, yes you must disclose any and all liabilities in your personal name, no matter if they show up on the credit report or not. If you don't, it can be looked at and dealt with as mortgage fraud. You don't want to go there.
Now if the loan is made as a commercial loan and its a non-recourse loan, meaning you don't have any personal responsibility to pay it back if your corporation should default, then that doesn't need to be disclosed. However your corporation will need to be disclosed and you will have to give a P&L from the corp, so in that way it becomes disclosed, however the loan its self wont count into your DTI, just the profits or losses from your corp.