How Does DTI work within an LLC

[Nick Leamon]

Hey there BP Nation,

I have scoured the forums for an answer to this question, and I have left more confused than when I started.

How does DTI ratio work when you own some homes under your name and some in an LLC?

My situation: I currently own 3 homes, 1 primary residence, and 2 rentals (SFH) I know that I am only allowed 1 more under Fannie may and Freddy mac. I am looking to potentially form an LLC in the future with Friends and/or family or by myself, and my question is how will that:

1. effect my DTI ration?

2. effect my Fannie and Freddy cap of 4 properties?

Best I can tell from previous posts on the site is that if you are having a problem with your DTI ration transfer properties to an "entity"(this is the usual word choice with little insight into what kind of entity the poster is referring to) However, when you dig a little deeper, it seems to be that even if you own property in an LLC if you sign a personal guarantee (which they pretty much always make you do* it all falls to you in individual, and therefore counts against your personal DTI ratio, which at least for this, seems to defeat the purpose.

* it seems if you have an LLC with 2 years of tax returns, you can actually have the business get the mortgage, and not have to sign a personal guarantee. (however this mirrors the college grad scenario of if every job requires 2-3 years experience how do you ever get a first job) And even if you could separate the LLC from you personally, how would the LLC's DTI every qualify? I doubt anyone has a property where 75% of the rental income(the amount banks generally count) would give you a 50% DTI ratio on it mortgaged. are the DTI rations on a LLC or business different than and individual?

and then as far as the # of properties. if the LLC buys the properties does that count as any of the 4 properties you are allowed to mortgage? I mean technically the LLC owns it, but I assume you are signing your name on all the documents?

I look forward to learning from all you brilliant people,

Thanks,

Nick Leamon