I have been approached to be a co-signer on an owner carryback, 2nd deed of trust. Its a rather large commerical deal so the 2nd is about $1.7M. My concern is how being on this note will impact my ability to get other loans. I currently have 13 loans outstanding (total value:$2M) with everything cash flow positive and LTV <0.80 (excellent credit and income as well). My portion of the income on deal would be much smaller than the payment on the 2nd as I will have minority position in the overall holding of the property.
Bottomline, is co-signing on this note going to kill my ability in the future to pull a loan to buy a rental property?? (my typical deal/loan is $200-500k with 20%).
Your thoughts are appreciated.
Depends on if the loan is reported to the credit bureaus.
let’s assume it is; also, I recall a number of lenders asking if I was guarantor or co-signer on notes not listed on the credit report.
Well…you can always go stated. With a 620 Fico and the LTV’s you mentioned you should have no problem.
Note: If you state that you have obligations not listed on your credit report the lender will ask for documentation.
I typically do full doc as I have FICO in mid to high 700’s and want the best rate.
So, I am correct that assume that this 2nd will cause a DTI problem for full doc. (i.e. liability $1.7M, income say $100k/yr, payment of $250k/yr–even though the cash flow for the property is sevicing the debt.
If can provide canceled checks, etc., that show that you are not the one making the payments you may be able to get an underwriting exception. Are you on title?
Does the property produce any income that can offset the liability?
On title, yes! I would not do it any other way (I’m sure some people might).
Yes, the property is producing sufficent income that is contactually transfer to servicing of debt instrutments in place. The money will not even pass thru my hands. The income I derive will be excess of what is need to cover the liability.
Thanks for all your input!