Loans · Fannie Mae Selling GuideCash back at closing on a purchase: what a buyer can and can't receive

Buyers sometimes expect money back at closing when seller credits or deposits add up to more than they need. On a Fannie Mae purchase loan, the loan proceeds may not give the borrower cash back except in two cases (Selling Guide B2-1.3-01, Purchase Transactions). The first is a reimbursement of the borrower's overpayment of fees and charges, including refunds some federal laws or regulations require; the settlement statement must clearly show the refund, and the loan file must document its amount and reason. The second is a legitimate prorated real estate tax credit in places where taxes are paid in arrears. When a borrower gets cash back for one of these reasons, the lender must confirm the product's minimum borrower contribution was still met. These amounts may instead be applied as a principal curtailment – a reduction of the loan balance. A prorated tax credit is not an interested party contribution, and it can't be counted as the buyer's assets for the transaction; but when the Closing Disclosure shows an escrow account that includes the seller's share of taxes for the time they owned the home, the seller's prorated tax credit may cover some or all of the funds needed for escrow.