How to Roll Your Home and Home Furnishings Into the Same Home Loan
Refinancing a mortgage or purchasing a house is likely the largest debt you'll ever assume. As such, it's important to think long-term when considering home financing. In some cases, you can keep your debt load fairly low by rolling certain items into the mortgage itself. You can bundle a home loan with other purchases such as home furnishings to keep just one payment for house and household items.
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Things You'll Need
- Mortgage paperwork
- Home appraisal
- Income documents (paystubs, W2s)
- Cost of home furnishings
Instructions
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Pull a copy of your credit report. The mortgage rate you receive will depend upon your creditworthiness. You should also pay for a copy of your FICO score, a three-digit number from 300 to 850. Excellent credit scores are above 720; poor scores are below 600. You should only consider home financing if you have good to excellent credit.
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Determine the value of your home and your loan-to-value (LTV) ratio. Without enough equity or a eligible LTV ratio, you'll be unable to roll in extra purchases (such as home furnishings) into a home loan. See the Resources section for an online valuation site. (Remember, this is an estimate; true appraisals cost between $200 and $500.) To find your LTV, divide your proposed mortgage amount by the value of your home---good LTVs are below 80 percent, but most lenders finance up to 95 percent.
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Calculate the total cost of your home furnishings. You'll need enough equity in your home to account for the furnishings value. Also, your LTV ratio should be below 95 percent. Leave room for any mortgage points (which are sometimes taken from the loan proceeds) and closing costs.
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Decide how you want to pay for the furnishings. You can take cash out of the mortgage loan to pay, or they may be added to the price of the home (if you are buying a furnished home). In either case, you'll need to alert your mortgage lender of the increased value of the loan.
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Research lenders. With excellent credit, you should look only at local banks and credit unions; these institutions provide the most competitive rates. With less-than-perfect credit, you may need to consider finance companies, such as Citi Financial.
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The loan offer you choose needs to meet not only your goal of financing home furnishings and home cost, but also your other long-term financial goals. These could include: eliminating debt faster, paying less each month, and owning your home free and clear in a relatively short period of time.
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Tips & Warnings
Remember that if you finance your home furnishings, you'll be financing them for the entire term of the mortgage loan, which can be as long as 30 years. You may want to consider store financing instead; paying for a couch for 30 years may not be the most financially friendly solution.
