This topic contains information on purchase transaction eligibility requirements, including:
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.
|The minimum borrower contribution requirements for the selected mortgage loan type must be met.|
|Proceeds from the transaction must be used
|Proceeds from the transaction may not be used
to give the borrower cash back other than the following:
If the LTV, CLTV, or HCLTV ratio exceeds 95% for a purchase transaction, the following requirements apply.
|LTV, CLTV, or HCLTV Ratio||95.01 to 97%
|Loan Type||Fixed-rate loans with terms up to 30 years.|
|Property and Occupancy||One-unit principal residence. Manufactured
housing is not permitted, unless the property meets the MH Advantage
All borrowers must occupy the property unless there is a Community Seconds subordinate lien.
|Homeownership Education||If all borrowers are first-time homebuyers, homeownership education is required. See B2-2-06, Homeownership Education and Housing Counseling for requirements.|
|Underwriting Method||DU only|
|Reserves||Reserves requirements will be determined by DU.|
|Other||All other standard Selling Guide policies apply.|
Non-arm's length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Fannie Mae allows non-arm’s length transactions for the purchase of existing properties unless specifically forbidden for the particular scenario, such as delayed financing. For the purchase of newly constructed properties, if the borrower has a relationship or business affiliation (any ownership interest, or employment) with the builder, developer, or seller of the property, Fannie Mae will only purchase mortgage loans secured by a principal residence. Fannie Mae will not purchase mortgage loans on newly constructed homes secured by a second home or investment property if the borrower has a relationship or business affiliation with the builder, developer, or seller of the property.
Borrowers may pay additional fees, assessments, or payments in connection with acquiring a property that is a preforeclosure or short sale that are typically the responsibility of the seller or another party. Examples of additional fees, assessments, or payments include, but are not limited to, the following:
short sale processing fees (also referred to as short sale negotiation fees, buyer discount fees, short sale buyer fees);
payment to a subordinate lienholder; and
payment of delinquent taxes or delinquent HOA assessments.
The following requirements apply:
The borrower (buyer) must be provided with written details of the additional fees, assessments, or payments and the additional necessary funds to complete the transaction must be documented.
The servicer that is agreeing to the preforeclosure or short sale must be provided with written details of the fees, assessments, or payments and has the option of renegotiating the payoff amount to release its lien.
All parties (buyer, seller, and servicer) must provide their written agreement of the final details of the transaction which must include the additional fees, assessments, or payments. This can be accomplished by using the Request for Approval of Short Sale or Alternative Request for the Approval of Short Sale forms published by the U.S. Treasury or any alternative form or addendum.
The settlement statement must include all fees, assessments, and payments included in the transaction.