Can a Realtor Use Commission as Down Payment on a Home

Check out this success story and it is a little known advantage for licensed Real Estate Agents. Actually, a Realtor commission may be used as down payment for the purchase of their own home. Normally, lenders are required to prove down payment in the buyer’s bank account. So, if underwriters require proof of funds in the bank, how can Realtors use commission which isn’t paid until after the loan closing? Let’s show two great mortgages which allow a Realtor to buy a home and use their commission as down payment.

How Can I Use My Realtor Commission to Buy My House?

Here is an actual example. A real estate agent went under contract to purchase a new construction home. Based on the purchase price, the loan was at the top of the FHA loan size limit. Although, the Realtor did not have the full 3.5% down payment required for FHA loans. Therefore, the agent asked “Is there a way I can use my commission from this sale as my down payment?”. Well, yes there is! So, do the quick math with a 2.5% buyer agent commission paid. Ultimately this left the agent only needing 1% down payment after crediting the commission!

Realtor commission used for down payment

Another option which could have been used is the Home Advantage Down Payment Assistance program.  It is offered by the NC Housing Finance Agency. Along with the commissions used as down payment, the DPA could have both covered the full down payment!

FHA Guideline: Acceptable source of funds for down payment

Real Estate Commission from Sale of Subject Property refers to the Borrower’s (i.e., buyer’s) portion of a real estate commission earned from the sale of the property being purchased. Thus, lenders may consider Real Estate Commissions from the Sale of the Subject Property as part of the Borrower’s acceptable source of funds. Obviously, the borrower must be a licensed real estate agent.

Fannie Mae Allows Realtor Commission as Down Payment

Not only will FHA allow commission as down payment, but a Fannie Mae loan could too. Sometimes a conventional loan makes more sense. Buyers with high credit scores or higher down payment are good examples. If a Realtor is using a conventional loan to buy a home and wants to use the commission from their purchase, Fannie Mae requires both of the following…

  • Lender verifies the Realtor (borrower) has sufficient funds for the closing without the commission, AND
  • Funds for closing are validated prior to closing

Then with sufficient funds verified for closing, the Realtor may then substitute commission from their purchase as down payment.

Keep in mind that with either loan type, underwriting will require a signed letter from the real estate agency stating the exact portion of commission is received by the agent for the transaction. This amount must match the closing disclosure.

Not only could we help a real estate agent buy a home, we also offer unparalleled service for your buyers.  So learn more about our team of loan officers and our line of products.

Written By: Russell Smith