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What are the general eligibility requirements for purchase transactions?

General Purchase Transaction Eligibility Requirements

A purchase money transaction is one in which the proceeds are used to finance the acquisition of a property or to finance the acquisition and rehabilitation of a property. The table below provides the general requirements for purchase money mortgage transactions. Certain mortgage loans and products may have different eligibility requirements for purchase mortgage transactions. If applicable, the differences will be stated in the specific mortgage loan or product topic section. 

General Requirements
  The minimum borrower contribution requirements for the selected mortgage loan type must be met.
  Proceeds from the transaction must be used to
  • finance the acquisition of the subject property,
  • finance the acquisition and rehabilitation of the subject property,
  • convert an interim construction loan or term note into permanent financing, or
  • pay off the outstanding balance on the installment land contract or contract for deed.
  Proceeds from the transaction may not be used to give the borrower cash back other than the following:
  • an amount representing reimbursement for the borrower’s overpayment of fees and charges, including refunds that may be required in accordance with certain federal laws or regulations. The settlement statement must clearly indicate the refund, and the loan file must include documentation to support the amount and reason for the refund; and
  • a legitimate pro-rated real estate tax credit in locales where real estate taxes are paid in arrears.

Note: If the borrower receives cash back for a permissible purpose as listed above, the lender must confirm that the minimum borrower contribution requirements associated with the selected mortgage product, if any, have been met. Reimbursements or refunds permitted above may also be applied as a principal curtailment in accordance with B2-1.5-05, Principal Curtailments. A pro-rated real estate tax credit is not an interested party contribution, and it cannot be considered when determining if the borrower has sufficient assets for the transaction. 

For additional information, see B2-1.3-01, Purchase Transactions 

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