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Family sales · Fannie Mae B3-4.3-05Gift of equity: selling a home to family with part of the price as a gift

A gift of equity is a gift from the seller of a property to the buyer: part of the seller's equity, transferred to the buyer as a credit in the transaction. On a Fannie Mae conventional loan it is allowed for principal residence and second home purchases, can fund all or part of the down payment and closing costs (including prepaid items), and cannot be used for financial reserves. The donor must meet the same acceptable-donor rules as any gift – usually a parent, grandparent or other relative – and the same minimum borrower contribution rules apply. When an acceptable donor gives it, the seller is not treated as an interested party, so the gift of equity is not subject to Fannie Mae's interested party contribution limits. The loan file keeps a signed gift letter and the settlement statement listing the gift of equity.

Example of a family sale

  1. Price

    $300,000

    The parents sell their home to their daughter.

  2. Gift of equity

    $30,000 credit

    Shown on the settlement statement as a credit to the buyer, with a signed gift letter.

  3. Result

    Down payment covered

    The credit covers a 10% down payment; the loan finances the rest, subject to the lender's approval.

Fannie Mae rules (B3-4.3-05)

  • Principal residence or second home purchase only.
  • Down payment and closing costs, including prepaids – not reserves.
  • Acceptable donor and minimum borrower contribution rules of B3-4.3-04 apply.
  • Not counted against interested party contribution limits when the donor is acceptable.
  • Documents: signed gift letter and the settlement statement showing the gift of equity.

What the TC watches

  • The contract, the gift letter and the settlement statement show the same amount.
  • The lender and title company know about the gift of equity before the Closing Disclosure is drafted.
  • The seller may have gift tax reporting – a question for the seller's tax professional, not the TC.

Questions families ask

What is a gift of equity?

A gift from the seller to the buyer of part of the seller's equity, given as a credit in the transaction (Fannie Mae Selling Guide B3-4.3-05).

Can a gift of equity be the down payment?

Yes, on a Fannie Mae loan for a principal residence or second home it can fund all or part of the down payment and closing costs, but not reserves.

Does a gift of equity count against seller concession limits?

Not when it comes from an acceptable donor: the donor is not considered an interested party (B3-4.3-05).

Related guides

ClosingCode keeps the gift letter, the contract and the settlement statement on one deal, so the amounts can be checked against each other before closing.

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Source: Fannie Mae Selling Guide B3-4.3-05, Gifts of Equity (10/07/2020) and B3-4.3-04, Personal Gifts (02/04/2026), selling-guide.fanniemae.com, read October 25, 2026.

General information about Fannie Mae conventional loans, not legal or financial advice. FHA, VA, USDA and other investors have their own gift rules, and a lender can add more. ClosingCode is software; it is not a lender. This guide is not a substitute for the advice or services of an attorney.