These days the personal guarantee will be required no matter where you go. Every loan made by an FDIC-insured institution must have two sources of repayment: a primary source and a secondary source. The primary source is the cash flow from the property. The secondary source is the collateral itself – the property. In the case of an owner-occupied residential loan, the primary source is the borrower’s income and the secondary source is the collateral, which in recent years has turned out to be problematic, to say the least.
Two years ago you probably would have been able to find some banks who would make you the loan without the personal guarantee. They’d accept the cash flow as primary source and the collateral as secondary source. But…
Those days are over for the foreseeable future. Today, you’ll have to offer a personal guarantee because the bank doesn’t know where the bottom is in terms of the collateral’s value and this is your first try at this. If you were willing to put 40%-50% down, you might not have to offer the personal guarantee because there would be more cushion on the collateral value.
Work with a broker or a small local bank. Don’t bother going to a big bank. You really shouldn’t need a broker, frankly. This sounds pretty straightforward. In fact, you might even be able to get the loan through a credit union since it’s not very large. That’s where I’d start if I were you.
