Buyers cannot directly “finance” their buyer’s agent commission into their mortgage in the traditional sense.
What “Financing” Actually Means:
The term “financing the commission” is commonly used, but it’s somewhat misleading. Buyers cannot increase the loan amount to cover buyers’ agent commissions without impacting LTV guidelines — meaning buyers cannot simply “finance” commissions.
Fannie Mae, Freddie Mac, and FHA do not allow commissions to be added to the balance of the mortgage. Simply put, investors will only lend against the asset they can take back and sell in a foreclosure, and an investor would not be able to take back and sell the commission for a service like real estate brokerage.
What Buyers Can Actually Do:
When people talk about “financing” a commission, what they really mean is:
Reducing the down payment: For a $500,000 transaction with 20% down, if the buyers want to “finance a 3% commission ($15,000),” the only way is to lower the down payment from $100,000 to $85,000 and then get a loan for $415,000 instead of $400,000. This increases the loan-to-value ratio and typically requires Private Mortgage Insurance.
The Consequences:
Increasing your financed amount at current mortgage rates also increases your loan-to-value (LTV) and debt-to-income ratios, triggering additional loan-level pricing adjustment (LLPA) fees.
So while the industry uses phrases like “financing the commission,” what’s actually happening is that buyers are putting less money down and borrowing more, which comes with higher costs and potentially less favorable loan terms.