Why don’t lenders like personal property included in a purchase mortgage? The primary reason is that lenders are lending on the appraised value of the residential real estate. Another reason is because including personal property may also be construed as an inducement to purchase, which is prohibited by underwriting guidelines. Some types of personal property may be included. Examples are ranges, refrigerators, stoves, washer and dryers, and carpet. Examples of personal property that are specifically excluded are furniture, cars, boats, and riding lawnmowers. The value of the prohibited property would need to be deducted from the purchase price before the loan to value is calculated.
I know that some people will criticize underwriters for trying to kill a deal. We have all heard the snarky jokes about mortgage underwriters. What is the difference between an underwriter and a rattlesnake? Compassion. Why are underwriter’s hearts in high demand for a transplant? Because they have never been used. Before we criticize the underwriters for overwriting, please consider this: mortgage underwriters are like referees. They implement a set of rules they have no control over. Their personal feelings are irrelevant. If a mortgage does not meet all of the specifications, the mortgage company will have to buy the loan back, which is a nightmare, and could cost the underwriter their job.
Remember, in this day and age, nothing slips by. Creativity is great, as long as it follows the rules.
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