Debt to income ratio

[Jacob Sherman]

Im new to real estate and I’m hoping to purchase my first property soon, but trying to get my ducks in a row first.

My question is this:

If you purchase a property within an LLC with a conventional loan, and I personally guarantee it (assuming that that will be a requirement for a brand new LLC), will that effect my personal debt to income ratio?

I’ve seen several blogs where people have said that in the above scenario, the mortgage doesn’t even show up on their personal credit report, and that what beings me to this question.

The thing that I'm really trying to figure out is how you get started in real estate, purchasing multiple properties, when your brand new, have limited capitol, and your LLC is brand new and doesn't have a credit score yet. (Besides owner financed, and hard money lenders)

[Reid Chauvin]

I do not believe that you can apply for a conventional loan as an LLC, however you can apply for a conventional loan as an individual and have it subsequently transferred to an LLC (if sold to Fannie Mae, not Freddie Mac). This will affect your DTI, but if you plan to buy another house in the future then any rent you can garner on the old house can cover the Debt and lower your DTI.

If this is your first purchase then I would buy as an individual, there are a bunch of great options out there for first-time homebuyers. FHA, as mentioned above is one, but you can actually put 3% down through Fannie Mae's 'Homeready' program, if your income is below the specified limit in your county. 5% down if not. To me these options are more favorable to an FHA loan given the excess PMI you will pay with FHA.