Down Payment and Closing Cost Assistance
Fannie Mae is making it easier to offer Down Payment Assistance
Fannie Mae has updated policies to make down payment more accessible to borrowers:
- We have expanded eligible down payment gift donors to include relatives of domestic partners, former relatives and godparents. Learn more in the September 2022 Selling Guide Update.
- We now allows lenders to offer grants to assist borrowers with their down payments, provided the grants meet certain conditions. Learn more in the August 2022 Selling Guide Update.
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 (of the borrower or domestic partner), former relatives, godparents, spouses, individuals engaged to marry the borrower, children, or other dependents.
- Grants from employers, municipalities, states, counties, or state or local HFAs, nonprofit organizations (excluding credit unions), federal agencies, regional Federal Home Loan Banks, Native American tribes and their sovereign instrumentalities, or lenders (under specific conditions).
For details and documentation requirements, see:
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.
Community Land Trusts and other shared equity programs preserve affordable homeownership opportunities by allowing borrowers to purchase homes at below-market prices.
The HomeReady® mortgage includes innovative income flexibilities that can help your customers qualify for an affordable mortgage with a down payment as low as 3%.
HFA Preferred™ pairs features of HomeReady® with the flexibilities from local housing finance agencies (HFAs), designed to serve more low- to moderate-income borrowers.
Down payment resources
To find down payment assistance programs based on traits like location, household income, and more visit DownPaymentResource.com.