Did you know that a Fannie Mae loan generally does not require any minimum contribution from the borrower’s own funds on one-unit properties? For a loan secured by a principal residence, the borrower may use gift or grant funds for all or part of the down payment and closing costs. This flexibility is available with any standard Fannie Mae Selling Guide product and MyCommunityMortgage.
Parents want to help their children purchase a first home? No problem, as long as a gift letter is provided and other Selling Guide requirements are met. Funds can be a gift from the borrower’s spouse, child, or other dependent, or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship; or a fiancé, fiancée, or domestic partner. The donor may not be, or have any affiliation with, the builder, developer, real estate agent, or any other party with an interest in the transaction.
Other sources of funds that are allowed to cover the down payment, closing costs, and/or reserves include: employer assistance; a gift or grant from an organization such as a church, municipality, nonprofit organization (excluding credit unions), and public agencies; or a Community Seconds provider.
With Community Seconds, the combined loan-to-value ratio can be up to 105% (principal residence only). Community Seconds mortgages allow a subsidized second mortgage to help with the borrower’s down payment and closing costs.
Funds from a municipality; state; county; state or local housing finance agency; nonprofit organization; a Federal Home Loan Bank; or employer may qualify as Community Seconds if all provisions of the Community Seconds Checklist are met.
The Selling Guide was recently updated (Announcement SEL-2014-07) to permit a regional Federal Home Loan Bank under one of its affordable housing programs to be an acceptable provider of funds for gifts, grants, and Community Seconds for down payment and closing cost assistance.
For more information and resources, see Selling Guide sections B3-4.3-04: Personal Gifts and B3-4.3-06: Donations from Entities and Fannie Mae’s Mortgage Products web page.