Using Realtor Commission For Home Purchase Down Payment

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Using Realtor Commission For Home Purchase Down Payment

This ARTICLE On Using Realtor Commission For Home Purchase Down Payment Was PUBLISHED On October 19th, 2019

What is Realtor Commission For Home Purchase

Using Realtor Commission For Home Purchase Down Payment is allowed as qualified funds.

  • Gustan Cho Associates work with many real estate agents across the nation
  • Many realtors will reach out directly to us gathering information for their potential clients
  • About 75% of our clients are either turned down by another lender or not getting the customer service they deserve from their current lender
  • When a realtor reaches out to us on their client’s behalf, they usually fall in love with what we have to offer
  • Gustan Cho Associates Mortgage Group is a direct mortgage lender without LENDER OVERLAYS
  • We offer more mortgage products than most lenders
  • We have a full slate of Conventional, FHA, VA, and NON-QM mortgage loans
  • We even have specialty jumbo mortgage products such as a 95% LTV JUMBO MORTGAGE
  • Having all these loan programs are the disposal without additional lender overlays allows us to help more clients than most lenders
  • In this blog, we will focus on how a realtor makes utilize their commissions to purchase a property

In this article, we will cover and discuss Using Realtor Commission For Home Purchase Down Payment.

Can Using Realtor Commission For Home Purchase Down Payment Allowed By Lenders As Verified Assets

Can Using Realtor Commission For Home Purchase Down Payment Allowed By Lenders As Verified Assets

We have helped many Realtors buy a home over the years.

  • There is a little-known advantage for our licensed real estate agents
  • Many agents are not aware that they can utilize all or a portion of their commissions to apply towards a down payment and or closing costs when buying a home
  • During the pre-approval process, a lender must verify a borrower has the required ASSETS to purchase a property
  • An underwriter is looking for proof of verified funds in the bank
  • However, if you are a licensed real estate agent, we can utilize your future commissions as part of your verified assets

In the housing market of 2019, a licensed real estate agent receives anywhere between 1.5% and 3% of the sales price in commissions. This amount may be used for qualification purposes.

Mortgage Case Scenario

What is Mortgage Case Scenario

Let’s go over an example:

A licensed real estate agent making 2.5% in commissions on this transaction would like to purchase a property with an FHA mortgage.

  • An FHA mortgage requires a 3.5% down payment
  • This means we would only need to verify 1% of the sales price in order to qualify this licensed real estate agent for an FHA mortgage
  • In order to utilize commissions as part of the verify down payment, a licensed real estate agent must provide a copy of their real estate license and a copy of their compensation agreement
  • Each agent and agency will have a different compensation agreement
  • The underwriter must verify exactly how much you will net in commissions on this transaction

In this example that 2.5% pay to the realtor in commissions can be credited to the down payment funds. These funds can even be added to certain down payment assistance programs. 

Using Realtor Commission For Home Purchase Down Payment On Conventional Loans

What amount must be the advance for conventional loans

Can a licensed realtor use their commissions for a conventional loan? 

  • YES! FANNIE MAE does allow future commissions to be used as part of the down payment or closing costs
  • Many times, a conventional loan makes more financial sense for a qualified borrower
  • Certain advantages such as cancellable mortgage insurance and looser appraisal requirements make conventional loans a more attractive mortgage option

A licensed real estate agent must also provide the following to use future commissions as assets.

How Do Mortgage Underwriters Calculate Verified Assets

How Do Mortgage Underwriters Calculate Verified Assets

Provide the lender PROOF you have the required VERIFIABLE funds WITHOUT the commissions prior to closing. 

Yes, this sounds a little backward.

  • For a conventional mortgage, you must verify you already have the funds
  • You may substitute the future commissions as part of the down payment assuming you can verify you already have those required funds
  • The underwriter will require a signed letter from the real estate agent stating the exact portion of the commission the licensed real estate agent will receive
  • This must match exactly to the closing disclosure, or the funds may not be used

Tax Consequences And Mortgage Guidelines

What are Tax Consequences And Mortgage Guidelines

What about the IRS (Internal Revenue Service)?

  • This can come as a relief to many licensed real estate agents
  • The Internal Revenue Service is up to date and condones the use of commission credits
  • The Internal Revenue Service has stated that these credits will not count as taxable income to the recipient
  • It is possible that the commission credits may contribute to capital gains down the road when you sell the property
  • But for all qualification purposes, the commission credit is not taxed

This is a great benefit when using a conventional mortgage.

Qualifying For A Mortgage With A Direct Lender With No Overlays

How Qualifying For A Mortgage With A Direct Lender With No Overlays

If you are a licensed real estate agent who is not familiar with Gustan Cho Associates, please check out the blog on why WHY REALTORS RECOMMEND US. As stated above, about 75% of our clients come from other lenders. We work with many families for as long as a year before they qualify for the home they would like to purchase. We are direct mortgage lenders with competitive interest rates and uncanny customer service. Our loan officers strive to be up to date on the ever-changing mortgage guidelines. Please call us with any general mortgage questions. You may contact Mike Gracz on 630-659-7644 or send an email to mgracz@gustancho.com. We are available seven days a week to help with your mortgage needs!

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