Originating & Underwriting

Down Payment and Closing Cost Assistance

Helping borrowers overcome down payment and closing cost barriers

Low down payment mortgages are a great solution for helping borrowers achieve homeownership, but for some borrowers, finding even a 3% down payment can be a challenge. Fortunately, in many cases, Fannie Mae allows funds for part or all of a down payment and closing costs to come from a variety of sources, helping more borrowers achieve the dream of homeownership. 

Fannie Mae allows three primary sources of closing cost and down payment assistance: Gifts, grants, and Community Seconds®.

Gifts and Grants

Gifts and grants can come from a variety of sources and can help borrowers defray upfront costs: 

  • Gifts from any individual who’s related to the borrower by blood, marriage, domestic partnership, adoption, or legal guardianship. That includes relatives, spouses, fiances or fiancees, children, or other dependents. 
  • Grants from churches, employers, municipalities, nonprofit organizations (excluding credit unions), regional Federal Home Loan Banks, Native American tribes and their sovereign instrumentalities, or public agencies. 

For details and documentation requirements, see:

Community Seconds

Community Seconds mortgages can come from many of the same sources as grants, but a second lien or other document is placed on the property to enforce compliance with it. Although Fannie Mae does not purchase Community Seconds, it does purchase first mortgages associated with Community Seconds.

Benefits of Community Seconds include:

  • Loans may have more than one Community Seconds mortgage (e.g., a third lien) up to the maximum 105% CLTV.
  • Can be used with both standard and affordable products, such as HomeReady®.
  • If the Community Seconds has a deferred repayment structure of five years or more:
    • Risk assessment is based on LTV, rather than the CLTV, if underwritten in Desktop Underwriter® (DU®).
    • The monthly payment for the Community Seconds is not included in the borrower’s debt-to-income ratio.
    • Loan Level Pricing Adjustments (LLPAs) that normally apply to subordinate financing are waived.

See the Community Seconds Checklist and B5-5.1-02 (Community Seconds Loan Eligibility) to confirm that a subordinate mortgage meets Fannie Mae’s requirements for Community Seconds.