Impact of LLC personal guarantee on personal mortgage application

[Daren Card]

I am working on beginning my real estate investment career with a group of like-minded acquaintances. We plan to begin with turnkey investments and are forming an LLC to hold these investments. We have capital but will need a hard money lender to help fund acquisition and rehab before we use a cash-out refinance to repay that hard money loan and move forward with a stabilized property.

We generally understand all this well, but we keep getting hung up on how commercial loans to the LLC may impact personal credit. Basically, most commercial lenders require a personal guarantee of the LLC loan by members of the LLC. There are existing questions on whether this impacts credit scores and it appears that it does not affect credit scores/profile unless the company defaults on the loan and they start going after the guarantees, which makes perfect sense.

Apologies if I missed it elsewhere, but what impact does a personal guarantee have on someone's ability to obtain a personal mortgage for their own primary residence? I'm assuming here that the LLC loan is not in default and there would be no reason for the lender to be pursuing payment from the LLC member guarantors. If one of us wanted to apply for a mortgage, does this guarantee on the LLC loan have any impact on underwriting? Do mortgage lenders even ask for this information or is the mortgage applicant required to disclose it without being prompted? Would it prevent someone from obtaining a personal mortgage or significantly reduce the amount they are approved for?

I'm sure different banks handle this in different ways, making the best answer "it depends". However, I'm hoping for some sense of whether this becomes an issue in practice. I'm guessing others have applied for personal mortgages soon after personal guaranteeing a commercial loan to their separate LLC. Did this come up during the application process and if so, how and did it make a difference?

Thanks in advance for any insight you can provide.

Daren Card