How Lenders View Small Business Administration Loans in Dallas
Mortgage lenders in Dallas and Fort Worth treat Small Business Administration (SBA) loans with careful scrutiny because they are often personally guaranteed. Even if the loan is in your business's name, that personal guarantee makes you liable if the business defaults. However, this doesn't automatically disqualify you.
A lender’s primary goal is to verify that the SBA loan payment is being made consistently by the business, not from your personal bank account. If you can prove the business has made the payments on time for the most recent 12 months, the lender can often exclude this debt from your personal debt-to-income (DTI) ratio. (The data, information, or policy mentioned here may vary over time.) The key is demonstrating a clear separation between business and personal finances.
What Documents Prove a Business Loan Is Paid by the Company?
To successfully exclude a business debt from your DTI calculation, you must provide clear and convincing evidence that the business is solely responsible for the payments. Lenders require specific documentation to verify this.
Essential Documentation Checklist:
- 12 Months of Canceled Business Checks: Copies of the front and back of canceled checks for the last 12 consecutive months, showing payments made to the creditor from your business account.
- 12 Months of Business Bank Statements: Complete, consecutive business bank statements for the past year. These statements must clearly show the loan payment being debited each month. The name on the bank account must match the business name exactly.
For example, if you have a $1,500 monthly equipment loan for your Fort Worth construction company, your lender needs to see that $1,500 payment leaving the business checking account every month for the last year. If you transferred money from your personal account to the business account just to cover that payment, the lender will likely count the debt against you personally.
Will My Business Credit Card Debt Affect My Personal Mortgage in Fort Worth?
Business credit card debt is treated differently from installment loans. If the credit card is in the business's name and does not appear on your personal credit report, it generally won't be included in your DTI. Lenders understand that business credit cards are used for fluctuating operational expenses.
However, there are exceptions:
- If It's on Your Personal Credit: Many small business credit cards require a personal guarantee and will report to your personal credit. If this is the case, the minimum monthly payment will be included in your DTI unless you can prove the business paid it for 12 months using the documentation mentioned above. (The data, information, or policy mentioned here may vary over time.)
- Sole Proprietorship: If you operate as a sole proprietor, lenders see no legal distinction between you and your business. Therefore, all business debts, including credit cards, are considered your personal debts.
Can I Get a Mortgage if My Business Partner Has Significant Debt?
Generally, your business partner’s financial situation, including their debt, does not directly impact your personal mortgage application. Lenders are underwriting you, not your business partner. The focus remains on your personal income, credit, assets, and liabilities.
The only scenario where your partner's debt could become a factor is if you have personally co-signed or guaranteed a business loan alongside them. If that debt appears on your personal credit report, it becomes your liability in the eyes of the lender, regardless of who is making the payments. To exclude it, you would again need to provide 12 months of bank statements proving the business made every payment on time.
How to Exclude a Business Auto Loan from Your Debt Ratio
Excluding a business vehicle loan is a common request for self-employed borrowers. The process is straightforward and follows the same documentation principle.
Let’s say you own a graphic design firm in Dallas structured as an S-Corporation. You have a $750 monthly payment for a company car that is titled in the business's name. When you apply for a mortgage, this $750 payment could significantly impact your DTI.
To exclude it, you must provide your mortgage lender with the last 12 months of your S-Corp's business bank statements. Each statement must show a $750 debit to the auto lender. If the statements clearly demonstrate this consistent payment history from business funds, the lender can omit that $750 payment from your personal DTI calculation, potentially helping you qualify for a larger home loan. (The data, information, or policy mentioned here may vary over time.)
What if the Business Debt Is on My Personal Credit Report?
Finding a business debt on your personal credit report is a common hurdle, especially for new businesses or those where a personal guarantee was required. But it is not a deal-breaker. The path to exclusion remains the same: proof of payment from the business.
Even if the debt is listed on your Experian, Equifax, or TransUnion report, you can override its impact on your DTI by providing the non-negotiable 12 months of business bank statements or canceled checks. The lender’s logic is that while you are the guarantor, the business has demonstrated its capacity and consistency in handling the obligation, reducing the risk that you will need to cover it with personal income. Be prepared and have this documentation organized before you apply to avoid delays.
How Your Business Structure Affects a Lender's View of Its Debt
Your business's legal structure plays a critical role in how lenders assess its debts during your mortgage application. The separation between you and your business is key.
- Sole Proprietorship: There is no legal distinction between the owner and the business. All business debts are considered personal debts by default. It is very difficult to exclude business debts from your DTI in this structure.
- Partnership: Similar to a sole proprietorship, partners are often personally liable for business debts unless the partnership agreement and loan documents state otherwise. Debts will likely be counted against any partner who personally guaranteed them.
- S-Corporation or LLC (Limited Liability Company): These structures provide a legal separation between the business and its owners. This makes it much easier to argue that business debts should not be included in your personal DTI. Lenders still require proof that the business, not you, is paying the debt. Providing the 12 months of business bank statements is the standard procedure to confirm this separation for mortgage underwriting purposes. (The data, information, or policy mentioned here may vary over time.)
If you're a business owner in Texas preparing to buy a home, understanding how your business finances affect your mortgage eligibility is the first step. For a clear assessment of your situation, it's wise to speak with a mortgage professional who specializes in self-employed borrowers.
Your business is a testament to your hard work. Now, let's make it the key to your new home. Get a clear, expert assessment of your mortgage eligibility as a Texas business owner. When you're ready to take the next step, you can Apply now to begin.
Author Bio
David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.
References
Fannie Mae Selling Guide: Business Debt in Borrower's Name
Consumer Financial Protection Bureau (CFPB): What is a debt-to-income ratio?
