Can Real Estate Commission be included with a USDA loan?

Can Real Estate Commission be included with a USDA loan?

When can Real Estate Commissions be included with a USDA loan in Florida, Texas, Tennessee, or Alabama?

Due to the recent NAR Settlement, this has become a common question that we receive. In today’s short video I will separate fact from fiction explain how real estate commissions can be included with a USDA loan.

But before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the process step-by-step and is a great tool for both homebuyers and Realtors alike.

Can Real Estate Commissions be included with a USDA loan in Florida, Texas, Tennessee, or Alabama?

Historically speaking, it has generally been understood by homebuyers that the seller would be the party responsible for payment of real estate commissions at time of closing. However, due to the recent NAR Settlement (currently pending court approval) that went into effect on August 17, 2024, it involves certain practice changes to real estate transactions and the associated compensation. For more information on that, I have included a link to the NAR Settlement FAQ.

When qualifying for a mortgage, one of the biggest questions a homebuyer has is what will be their total out-of-pocket cost on a home purchase. This can include items such as deposits, inspections, appraisals, closing costs, any required down payment, and any real estate commission.

Obviously, if a homebuyer has agreed to pay real estate commission, that would increase the out-of-pocket money needed to purchase a home. But what if we were able to include real estate commission into a USDA loan?

Can Real Estate Commissions be included with your Mortgage?

Unlike FHA, VA, or Conventional loans, USDA loans provide for the ability to increase their loan amount in cases where the appraised value comes back higher than the sales price.

So, while this would not be possible under FHA, VA, or Conventional programs, in cases where the appraised value is higher than the contract sales price, we can increase the USDA loan up to that value and include reasonable and customary closing costs which includes real estate commissions.

For example, with a sales price of $250,000 and no down payment, a homebuyer’s initial base USDA loan amount would be $250,000. If the appraised value then came in at $260,000, we could increase their USDA loan by $10,000 to include closing costs such as title insurance, recording fees, insurance premiums, and also real estate commissions!

Example:

• Sales Price: $250,000
• USDA Loan: $250,000
• Appraised Value: $260,000
• USDA Loan can be increased by $10,000
• Now you can include closing costs with the increased loan amount!

Key points – Can Real Estate Commissions be included with a USDA loan?:

• This does not happen automatically!
• It depends on if the appraised value is higher than the sales price.
• Remember that the appraised value is determined after the sales price has been agreed upon.

Further, because USDA loans do not require a down payment, being able to include real estate commission into a USDA loan is yet another way to help homebuyers save on their overall out-of-pocket costs when purchasing a home.

While there may be online sources, lenders, and publications that are providing misinformation on this topic, rest assured that this is a USDA loan fact that I have personally reconfirmed directly with USDA.

Please let our team know if you are a homebuyer looking to qualify for a USDA loan or a Realtor who has a client that wants to save money when purchasing a home.

As a USDA Approved Lender and your trusted resource, we will walk you through the USDA loan qualifying process step-by-step. Just call, text, or email to discuss your scenario and let us show you the “Metroplex” difference!

Call/Text: (863) 593-2001
800-806-9836 Ext. 280
SeanS@MPLX.org

Thank you again for forwarding and sharing today’s video with any friends, family, co-workers, or clients who are looking to buy, sell, or refinance!

As always, I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.