3.5% FHA - 3% commission = 0.5% Down Payment??

Question

Can a self-representing real estate agent house-hack with a 3.5% FHA and get 3% back on the tail-end through commission? I'm clearly missing something here, right?

(Obviously being over-leveraged could be a concern, but just humor me.)

Upen Patel · Answer

Hey! @Nick Moore. Yes, you certainly can represent yourself on a real-estate purchase transaction and be paid the commission. I work with many investors who are "realtors".

Of course, you have to qualify for the FHA loan, but that's a different matter.

André Anderson · Answer

You definitely can and I did for my house hacks... a step further, I also used down-payment assistance programs that were available the first time for first time home buyers that covered the 3.5% down-payment.  I made money "buying" my home because I didn't really have any money in the deal after being paid commission.  Of course the fear of over leverage is there, especially if you are living in the house hack.

For most lenders and I think for Fannie Mae products you can't count commission in order to "qualify" for the loan, so you will need to have whatever requirements are necessary. With down-payment programs, that might just be $1000-$5000.

If you are an agent, this is a great strategy to employ. Agents should also speak with their broker on ways to change non-100% commission splits on their own deals, and have commission apply at closing to down-payments. Essentially the commission doesn't hit the agent as income which can potentially help with taxes, too! That's not tax advice and seek competent licensed tax advisers if you have questions on that.

John Bucci · Answer

The net commission will prob end up being a bit less, but definitely can save you 1-2% or so on the deal.

I think you're asking if you can roll the commission into the closing in order to only need to come up with very little cash out of pocket?

I actually don't know the answer to that but the reality is if you're able to qualify for the loan you probably need to have a few $ in your bank anyways. So could just lay it out and get refunded after the fact.

3.5% FHA - 3% commission = 0.5% Down Payment??

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