Conventional loans · Fannie Mae B3-4.3-06Down payment assistance grants: what Fannie Mae accepts

On a Fannie Mae loan for a principal residence, the buyer can use a grant – money donated by an acceptable entity – for all or part of the down payment, closing costs or reserves. Acceptable sources are a federal, state, county or city government, a housing finance agency, a 501(c)(3) nonprofit, a regional Federal Home Loan Bank affordable housing program, the buyer's employer, a federally recognized Indian tribe, or a lender – but never the seller or another interested party, and the assistance cannot be funded through the first mortgage, for example by premium pricing. How much the buyer must bring: at 80% loan-to-value or less on one to four units, nothing of their own; above 80% on a one-unit home, also nothing; above 80% on two to four units, a 5% contribution from the buyer's own funds first. The grant is documented with the award letter or agreement, which must say repayment is not expected and how the money moves, plus proof of the transfer (the donor's canceled check or the settlement statement). Lender-funded grants are limited to HomeReady purchases and need a 3% contribution (5% on 2–4 units above 80%). A lender credit for closing costs is different: it can cover only borrower-paid closing costs and prepaids – not the down payment or reserves.