When applying for a loan in the United States, used home transaction taxes generally cannot be combined with the total home price. Lenders calculate loan amounts based on the home’s appraised value or purchase price, not including transaction taxes. These taxes, such as transfer taxes or stamp duties, are considered separate closing costs paid at the time of sale. The loan amount is determined by the agreed-upon purchase price or appraised value, minus the down payment. Transaction taxes are excluded from the loan amount because they are not part of the home’s valuation but rather expenses tied to the transaction.

This distinction is critical for mortgage underwriting. Lenders use the loan-to-value (LTV) ratio, which compares the loan amount to the home’s appraised value, to assess risk. Including transaction taxes in the home price would inflate the LTV ratio, potentially disqualifying borrowers or increasing loan costs. For example, a $300,000 home with a 5% transaction tax ($15,000) would have a total cost of $315,000, but the loan amount remains $300,000 (assuming a full price purchase). Closing costs, including taxes, typically average 2–5% of the home price, according to the Federal Reserve’s 2022 Survey of Consumer Finances. Regulatory guidelines from Fannie Mae and Freddie Mac explicitly state that closing costs must be documented separately from the loan amount to ensure transparency. Thus, transaction taxes remain a standalone expense and do not affect the loan principal. This practice aligns with standard financial regulations and risk assessment models, ensuring accurate valuation and fair lending practices.