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:
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 B2-1.4-05, Principal Curtailments.
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%
Note: The CLTV ratio can be up to 105% if the subordinate lien is a Community Seconds loan.
|Loan Type||Fixed-rate loans with terms up to 30 years.
Note: High-balance, adjustable-rate, and HomeStyle Renovation loans are not permitted.
|Property||One-unit principal residence. Manufactured housing is not permitted.|
|Underwriting Method||DU only|
|Reserves||Reserves requirements will be determined by DU.|
|Other||All other standard Selling Guide policies apply.|
Note: The above requirements do not apply to HomeReady mortgage loans. See B5-6-02, HomeReady Mortgage Loan and Borrower Eligibility, for requirements for HomeReady mortgage loans with LTV, CLTV, or HCLTV ratios of 95.01 – 97%.
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);
Note: This fee does not represent a common and customary charge and therefore must be treated as a sales concession if any portion is reimbursed by an interested party to the transaction.
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 Supplemental Directive 09–09or any alternative form or addendum.
The settlement statement must include all fees, assessments, and payments included in the transaction.
The table below provides references to the Announcements that have been issued that are related to this topic.
|Announcement SEL-2016–08||October 24, 2016|
|Announcement SEL-2016–07||August 30, 2016|
|Announcement SEL-2015–10||September 29, 2015|
|Announcement SEL-2015–07||June 30, 2015|
|Announcement SEL-2015–01||January 27, 2015|
|Announcement SEL-2013–01||January 17, 2013|
|Announcement SEL-2011–13||December 20, 2011|
|Announcement SEL-2011–06||July 26, 2011|
|Announcement SEL-2010–04||March 29, 2010|
|Announcement 08-35||December 18, 2008|