REblog: Household Furnishings Included In The Financing Of A Property?

 

Ginny Gorman wrote a blog last week titled "So You Want the Furniture - Well I Sell Real Estate" which I commented the following on

"Ginny as long as it is not part of the sales contract it is OK, but the minute that Underwriting notices that personal items are part of the sales contract, the financing could be in jeopardy.  Realtors need to be careful with that."

Ginny thinking ahead as she always is, quickly came back with:

"George, I think this is a great forthcoming blog from you!"

At first I chuckled but then it hit me, she was right, I needed to do a blog further explaining "Can Household Furnishings Be Included In The Financing Of A Property?".

The quick answer is that all financing programs have restrictions on including personal/household items in the financing of a property.  I am not going to blog about all of them but I do want to provide the guidelines for Fannie Mae, and FHA.  Because the blog would be to long if I were to include them both in one blog, I will do separate blogs on each one.  I will start with the one that has the more condensed guidelines on this issue, Fannie Mae.

Fannie Mae refers to this as "Interested Party Contributions" (IPCs), and defines it as:

"Costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property."

Examples of an interested party to a transaction includes:

• Seller
• Builder/Developer
  
• Real Estate Agent/Broker
• Any other party that would benefit financially from the sale of the property.

Fannie Mae, gets even more specific when it comes to Sales Concessions, and how they will be addressed if included in the Sals Contract:

"Sales Concessions are IPCs that take the form of non-realty items.  They include cash, furniture, automobiles, decorator allowances, moving costs, and other giveaways, as well as financing concessions that exceed Fannie Mae limits.  Consequently, the value of sales concessions must be deducted from the sales price when calculating LTV and combined LTV ratios for underwriting and eligibility purposes."

As you can clearly see Fannie Mae will not allow the inclusion of furniture, curtains, or much to my dismay wide screen TV sets.  Any mention of these or other similar items in the Sales Contract will result in a reduction to the financing, by devaluing the property by the estimated value of the items.  Not only will they result in a reduction to the financing, they may even jeopardize the financing all together if not removed from the Sales Contract.  Exceptions would be items that are customarily thought of as being part of the house like stove, refrigerator, and dishwasher.

In the next blog I will cover FHA, and FHA Guidelines even get more specific than Fannie Mae, and will help to clarify anything that may be vague in the Fannie Mae Guidelines.

 

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 Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 orgsouto@mccuemortgage.com