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. The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity. See B3-4.3-04, Personal Gifts.
The following documents must be retained in the loan file:
a signed gift letter (see B3-4.3-04, Personal Gifts), and
the settlement statement listing the gift of equity.
If the requirements listed in this topic are met, the gift of equity is not subject to Fannie Mae’s interested party contribution requirements (see B3-4.1-02, Interested Party Contributions (IPCs)).
The table below provides references to the Announcements that have been issued that are related to this topic.