The Quick Read: No law sets a universal ownership percentage; each lender program picks its own line, and most programs we place files with draw it somewhere around 20% to 25% of the borrowing LLC, with every member at or above that line signing a personal guaranty. The LLC is the borrower, but a person still stands behind the note.
- The trigger is a lender convention, not a regulation. It changes from program to program.
- Check whether the line reads “at or above” or “above” the percentage. One point can decide who signs.
- Some programs add a combined-ownership test or require the managing member regardless of share.
- Members below the line usually skip the guaranty but still give identity information.
- Each guarantor is underwritten personally: credit, reserves, and experience all matter.
Investors forming a partnership LLC often assume one of two things. Either everyone signs, or nobody does because the LLC “protects” them. Both are usually wrong. The real answer sits in the operating agreement, the lender’s line, and a few edge cases worth knowing before money moves.
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Key Terms Defined
- Guarantor: an individual who personally promises to repay the loan if the borrowing entity does not.
- Recourse: the lender’s ability to pursue the guarantor’s personal assets after the property is exhausted.
- Threshold: the ownership percentage at which a member must sign a guaranty.
- Aggregate test: a program rule that the signing guarantors together must hold a minimum combined share of the entity.
- Managing member: the member with authority to run the LLC and sign for it.
- Passive member: an owner with a stake but no day-to-day control.
- Joint and several liability: each guarantor can be pursued for the full amount, not just a proportional share.
Why Doesn’t the LLC Remove the Guarantee?
The LLC takes title and signs the note, but the lender still wants a person accountable. An LLC does not erase that. On most DSCR files, an authorized member signs the note and mortgage in the entity’s name, and the individual guarantors sign the guaranty separately, as Lendmire’s DSCR cash-out loan types and guarantor rules for an LLC lays out.
True non-recourse is the exception. It tends to appear only in specific setups, such as a purchase made through a self-directed retirement account. For a standard multi-member LLC, plan on personal guaranties. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines, but that does not mean the people behind the entity go unreviewed.
How Do Lenders Decide Who Signs?
Lenders use four levers: individual ownership percentage, a combined-ownership test, management role, and look-through for layered ownership. Across our wholesale network, programs mix these differently, so one lender’s rule is never a safe guide to another’s.
1. Individual percentage. Many programs require any member who holds a meaningful ownership stake to sign as a guarantor. Because each program sets that threshold differently, treat these as market patterns, not a promise for any one file.
2. Aggregate test. Some programs require the guarantors to hold a combined majority. If one member holds a large stake alone, that member may satisfy it. If several small holders sit just above the line, they may all need to sign to reach the combined share.
3. Management role. Ownership is the usual trigger, not job title. Even so, some programs require the managing member to sign regardless of percentage, and a few look at management authority instead of ownership.
4. Look-through. When a trust or another company is a member, the lender traces ownership through each layer to the individuals behind it. Those people become the guarantor candidates.
Where Does the 25% Number Come From?
Part of the answer is a different rule altogether. FinCEN’s beneficial-ownership definition covers anyone who exercises substantial control or who owns or controls at least 25% of the ownership interests, per the FinCEN fact sheet. That page also now notes that U.S.-created entities and their owners are exempt from that reporting requirement.
A separate bank-customer rule has its own 25% test. As Holland & Knight explains, a financial institution collects the identity of one control person and each person owning 25% or more of the equity. Hughes Hubbard’s summary of the original rule gives the same two prongs.
The key point: those are identification thresholds. They are not guaranty thresholds. The two can land on the same number for a given loan, but they are separate rules, and a lender is free to set its guaranty line lower or higher.
Who Signs? Scenarios by Ownership Split
Assume a line at 20% or more, unless noted.
| Ownership split | Who signs | Who is left out | What to watch |
|---|---|---|---|
| Single member, 100% | The owner | No one | Simplest file |
| 50/50 | Both members | No one | Both credit profiles count |
| 60/20/20 | All three | No one | Line is “at or above” |
| 33/33/17/17 | The two 33% members | The two 17% members | Smaller members still give ID |
| Five equal 20% members | All five | No one | At a 25% line, none clears it |
| Managing member at 10% | Possibly the manager | Others below line | Some programs require the manager |
The equal-split case is the surprising one. At a 20% line, five members all sign. Move the line to 25% and nobody is reviewed on percentage alone. In that situation, a lender may fall back on a guaranty from the managing member, or may adjust other terms.
Boundary wording matters too. “20% or more” and “greater than 20%” produce different results for a member sitting exactly at the line. Ask which phrasing the program uses before settling the cap table.
What About Passive Members Below the Line?
Members under the line usually do not sign. Their identity is still collected for the lender’s file, and some lenders reserve the right to ask for guaranties from members holding as little as 10%.
Staying off the guaranty does not mean staying out of risk. A passive member can still lose their capital contribution if the LLC loses the property. Staying under the line limits personal liability on the loan, not exposure on the investment.
What Does Signing Actually Mean?
Signing means taking on personal responsibility for the loan if the entity cannot pay. That is typical practitioner language, not a universal term, so read the actual document.
Joint and several liability is the part that surprises people. Liability is not proportional to ownership. Picture a three-member LLC where two partners hold 40% and one holds 20%. If one of the 40% holders becomes insolvent, the lender can pursue the other signers for the full balance, not just their share. That is why partners often sign a separate agreement between themselves, covering contribution and indemnity. A real estate attorney can draft one, and it is worth discussing before closing.
How Do Multiple Guarantors Affect the File?
Each guarantor is underwritten personally. The lender pulls credit on every one, reviews reserves and experience, and looks at the guarantor’s real estate owned schedule, including entity-held properties where the guarantor has a meaningful stake. Lendmire’s view across the network: the guarantor’s credit, reserves, and experience still drive the file, even though the property’s rent drives the coverage ratio.
With two or more guarantors, many lenders use the lower of the middle scores. A weaker partner can therefore set the pricing and leverage tier for the whole file. Credit tiers in our network start around a 620 floor in parts of the network, with most programs wanting about 660 and 700+ unlocking the strongest leverage. Purchase leverage typically runs 75% to 80% LTV on an investment property, and cash-out refinances top out around 75% LTV, all subject to lender guidelines.
Take two partners who each own half. One has a 740 score and the other sits near 640. The blended approach can pull the file toward the weaker score. Sometimes the cleaner move is restructuring the cap table so the stronger-credit partner holds the guarantor-sized stake. Not every investor will want that, and it has to reflect the real partnership economics.
Reserves also follow the file. They are commonly around 6 months of PITIA, with about 9 months on loans above $1,500,000, though conservative rate-term files at modest leverage under that size can see reserves waived. That varies by lender, leverage, and transaction type.
How Does Layered or Entity Ownership Change the Answer?
When a holding company sits above the property LLC, the lender traces through each layer. Trusts as members raise the same look-through question.
Substantial control is a separate idea. A person with 1% who runs the company can still be a beneficial owner under FinCEN’s definition. That is an identification concept and does not by itself make them a guarantor.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Structuring the Cap Table Before You Apply
Settle percentages before money moves. Crossing a lender’s line brings personal credit review and personal exposure, so the split is a financial decision as much as a legal one.
A short checklist:
- Decide who is comfortable carrying personal recourse, and who is not.
- Confirm the program’s line and whether it reads “at or above” or “above.”
- Check the credit profile of every member who might cross it.
- Write ownership percentages and management authority clearly in the operating agreement, since that is what underwriting reads.
- Expect to provide the operating agreement, articles of organization, an EIN letter, a certificate of good standing, and photo ID for each guarantor.
- Plan for later changes. Adding an investor or buying out a partner after closing can alter who the lender considers a guarantor, so ask before moving units around.
A larger stake brings more control and more exposure together. A smaller stake can keep a member off the guaranty, though it also reduces their say. For some investors, a passive role below the line fits. For others, it defeats the purpose of joining the deal.
The coverage ratio is the other half of the file. DSCR compares rent to PITIA only. Many select programs start at 1.00, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 is not the same as positive cash flow, since repairs, vacancy, and management sit outside the calculation. For the full picture, see Lendmire’s complete DSCR loans guide.
Entity-titled loans are available subject to lender program eligibility, and each lender sets its own signing rules.
Common Misconceptions
“An LLC means no personal liability.” Not on most DSCR loans. The guaranty sits behind the entity.
“All members must sign.” Not necessarily. It depends on the operating agreement and lender policy.
“The guarantor rule is a law.” It is a program convention. The 25% figure many investors cite traces back to the FinCEN definition, a separate rule.
“No personal documentation means no personal review.” The property’s income drives qualification, but the guarantor’s credit, reserves, and real estate owned are still evaluated.
Frequently Asked Questions
Do I have to sign if I own a small share?
Usually not, if your stake falls below the program’s line. Many programs start around 20% to 25%, though some go lower, and a few lenders may ask for guaranties from members at 10%. You will likely still provide identification. Confirm the specific program before assuming you can stay off.
Does a 50/50 LLC need both members to sign?
Typically yes. Each member holds well above any common line, so both usually become guarantors. Both credit profiles are then reviewed, and the lower of the two middle scores may set the pricing tier.
Can my silent partner stay off the loan?
Often, if the silent partner holds less than the program’s line and the program has no combined-ownership test that pulls them in. They may still be identified, and they remain exposed on their capital contribution if the property is lost.
Can the managing member sign alone?
In some programs, yes, if that member holds enough of the entity or the lender looks at management authority. Other programs require every member over the line to sign regardless. Programs vary.
Am I liable for the whole loan if I sign?
Commonly, yes. Guaranties are often joint and several, so one guarantor can owe the full amount if another cannot pay. Many partners use a private contribution or indemnity agreement to share the burden, which is worth discussing with counsel.
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire, a mortgage broker arranging DSCR financing through select lenders across 41 markets, including Washington, D.C., can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Program details change and every file is underwritten individually, subject to lender guidelines and not a commitment to lend. Tax treatment varies; consult a qualified professional.
Whatever the line turns out to be, the cleanest deals start with a cap table the partners agreed on before anyone applied.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. FinCEN BOI Reporting Rule Fact Sheet
2. Holland & Knight FinCEN reference guide
3. Hughes Hubbard FinCEN rule summary
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Shop and Document Rental Insurance Before a DSCR Loan · Can You Refinance a Rental Awarded in Divorce With a DSCR Loan? · Is a 30-Year DSCR Loan Safer When Your Blanket Loan Matures?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.