Mortgages Can Only Finance Real Estate; Not Cars, Pianos, Commissions

After the dot.com bust 15 years ago, a lot of “wannabe rock stars” had to sell the houses they couldn’t afford. As an enticement to potential buyers (to overpay), they often would include the car they couldn’t afford (usually a Porsche) that was parked in the garage they couldn’t afford.

Lenders, of course, frowned on this. The reason is that the buyers were effectively using mortgage financing to finance a Porsche, making the mortgage riskier and effectively higher “loan-to-value.”

Mortgages can only finance real estate. This is why lenders do not want to see the personal property (like pianos and expensive stand-alone appliances) in contracts. Lenders also do not allow buyers to pay commissions.

The only exception to the “real estate only rule” is closing costs. Sellers are allowed to pay 3% to 9% of the purchase price towards a buyer’s closing costs; these credits come out of the purchase proceeds so buyers are effectively financing closing costs with the mortgage.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646