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B3-4.3-05, Gifts of Equity (10/07/2020)

Introduction

This topic contains information on gifts of equity, including:


Gift of Equity

A “gift of equity” refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction.

A gift of equity

  • is permitted for principal residence and second home purchase transactions;

  • can be used to fund all or part of the down payment and closing costs (including prepaid items); and

  • cannot be used towards financial reserves.

The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity. See B3-4.3-04, Personal Gifts. When a gift of equity is provided by an acceptable donor, the donor is not considered to be an interested party and the gift of equity is not subject to Fannie Mae’s interested party contribution requirements (see B3-4.1-02, Interested Party Contributions (IPCs)).


Documentation Requirements

The following documents must be retained in the loan file:


Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2020-06 October 07, 2020

 

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