Can You Include New Appliances in a Mortgage?
There are some strategic ways to include new appliances in a mortgage when purchasing or refinancing your home.
While most mortgage programs do not allow for a specific allowance for appliances, there are ways to include the cost of appliances during the purchase or refinance transaction.
If you would like to purchase a home and find a way to include new appliances in the process, then complete this contact form and we will help you.
How to Include Appliances in a Mortgage
These are various ways to include appliances in a mortgage or within the purchase or refinance transaction.
FHA 203k Rehab Loan to Purchase Appliances
The best mortgage option when you are trying to include new appliances in a mortgage is the FHA 203k rehab loan.
With an FHA rehabilitation style loan, you are able to purchase a home and also borrow the funds needed for home improvements and repairs. This includes financing new appliances in the mortgage.
To qualify for this mortgage, the home must be your primary residence, you will need a down payment of 3.5%, and must have a two year work history.
If you already own your home, you can refinance into an FHA 203k rehab loan and finance your appliances plus anything else you would like to improve in the home.
Including Appliances in a New Construction Home
If you are working with a builder to purchase a new construction home, you will be able to include appliances in your mortgage.
Prior to getting a mortgage approval, you can negotiate with the builder to include the appliances that you want in the home. This will likely bump the price up a bit but the cost of the appliances will be part of the purchase price and therefore included in your loan.
Be mindful of the fact that builders will likely add profit to the cost of the appliances.
Cash Out Refinance to Include Appliances
If you already own your home and have plenty of equity, you can get a cash out refinance to cover the cost of appliances.
You should consider the cost of this transaction before moving forward. Your new interest rate should be lower than your existing mortgage rate.
There will be closing costs when you refinance and those costs need to be factored into your decision. If you are only looking to cash out a few thousand to pay for appliances, then make sure you are going to see significant savings with the interest rate.
Seller Closing Cost Credit to Cover Appliances
During many home purchase transactions, you can negotiate with the seller to pay for your closing costs. This represents thousands of dollars. You would otherwise be required to bring those funds to the closing table.
When the seller pays for your closing costs, you can then spend that money on new appliances after you move in.
This is the best option because the seller is buying the appliances for you versus you having to finance them for 30 years in your mortgage.
Lender Credit for New Appliances
When you are working with a lender, you can ask them for a closing cost credit. The lender may have the ability to provide you with thousands of dollars in a reduction in your closing costs so you can use that money to purchase appliances. This is similar to the strategy you would use with the seller credit.
What you need to understand is the lender will charge you a higher rate in exchange for that credit. This means you are paying more interest on your entire loan balance in exchange for having the money to buy appliances.
Do the math or have a loan officer help you to determine whether this makes sense for you.
Do Houses Come with Appliances?
When you buy a home, it usually comes with appliances but there are situations where the seller is taking the appliances with them.
Lenders will usually require the home to come with fixed appliances which include the stove and dishwasher. It is not uncommon for homes to be sold without a refrigerator or washer and dryer.
Sometimes, the seller has expensive appliances and for the sale of the home, they will purchase inexpensive used appliances to be included in the sale of the home.
Buying a House with Old Appliances
If you are buying a home with old appliances, have your home inspector spend time evaluating the condition and performance of the appliances.
The cost for any non-working appliances should be taken off of the purchase of the home or can be negotiated as a closing cost credit from the seller.
If you are getting a good deal on the home and do not want to push too hard to have the appliances replaced, you should budget for the replacement cost after closing.
Can I Buy Appliances with Cash before Closing?
You can absolutely buy appliance with cash before closing. Keep in mind that anything can happen right up until the time when you sign the closing documents. Therefore, you may want to hold off until immediately after you close before paying cash for the appliances.
If you are getting an unbelievable deal that you cannot pass up, then of course you should consider making the purchase.
A word of caution here is to speak with your loan officer before making the purchase. You do not want to use some of the cash you needed to close on the loan. This includes any cash reserve requirements.
Don’t Buy the Appliances Until After Closing
If you are in contact to purchase a home and are shopping for new appliances, we suggest not making the purchase until after you close on the home.
Having a mortgage approval is great, but lenders will often pull credit again before closing. If you put expensive appliances on a credit card and now you have a larger minimum payment, it could negatively impact your DTI. Depending upon what those numbers look like, it is possible to have your approval reversed.
It is best not to make any major purchases until after you close on the purchase and if you have any questions at all, speak with a loan officer first.
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