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Updated almost 7 years ago on . Most recent reply
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Hard money loan shows up in your dti
Most Popular Reply
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Originally posted by @Nicholas Weckstein:
if thats the case then how could one expect to refinance out of a hard money loan?
Debts being paid off with cash out refinance proceeds are not included in your DTI. When you refinance, you typically pay off the existing mortgage and replace it with a new one.
Example math assuming a fake scenario where someone's only debt is the one property in a HML.
HML payment on Property A: $5000
Income $8000
Current DTI: $5k/$8k = 62.5%
Payment after refinance on Property A: $3000
DTI calculated for that refinance: 37.5%
Where you can get jammed up is if you want to purchase or refinance Property B before Property A is out of hard money. Flippers who have 3 flips in the works all in hard money, and want to buy one using conventional financing are typically SOL, unfortunately. But if your plate only has 1 thing at a time on it, it's a non issue.
Good luck!
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It may not show up on your credit report BUT you must report it. Hiding material facts is bank fraud.
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My suggestion is to take a hard money loan out in the name of a LLC, therefore loan will not be reported to credit bureau.
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And YES John is correct.
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Originally posted by @Bob Green:
My suggestion is to take a hard money loan out in the name of a LLC, therefore loan will not be reported to credit bureau.
See my post above. If the borrower owes the money it MUST be reported legally.
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Yes John I agree 100%
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if thats the case then how could one expect to refinance out of a hard money loan?

Originally posted by @Nicholas Weckstein:
if thats the case then how could one expect to refinance out of a hard money loan?
Debts being paid off with cash out refinance proceeds are not included in your DTI. When you refinance, you typically pay off the existing mortgage and replace it with a new one.
Example math assuming a fake scenario where someone's only debt is the one property in a HML.
HML payment on Property A: $5000
Income $8000
Current DTI: $5k/$8k = 62.5%
Payment after refinance on Property A: $3000
DTI calculated for that refinance: 37.5%
Where you can get jammed up is if you want to purchase or refinance Property B before Property A is out of hard money. Flippers who have 3 flips in the works all in hard money, and want to buy one using conventional financing are typically SOL, unfortunately. But if your plate only has 1 thing at a time on it, it's a non issue.
Good luck!

Chris Mason thank you ! That’s what I was missing.
So when I’m refinancing I would tell them I’m using the money to pay off that loan. Gotcha.
1 at a time works for me !