Loans · Fannie Mae Selling GuideBuying a leasehold or ground-lease home: what the lease must say for a Fannie Mae loan

In some markets the buyer owns the house or condo but leases the land under it. Fannie Mae buys loans on leasehold estates in areas where that ownership has market acceptance (Selling Guide B2-3-03) – one- to four-unit homes, condo, co-op and PUD units, and manufactured homes in approved condo or PUD projects; a unit in a project on a ground lease counts too. The loan must be a first lien on the improvements and the borrower's leasehold interest; the lease and improvements must be real property; all rent and other payments due under the lease must be paid; the lease must not be in default; and it must be recorded and in full force. For new leases entered into on or after September 1, 2025, any lien on the landowner's fee estate must be subject to a recorded agreement to recognize the lease. Key lease terms: an unexpired term at least five years beyond the loan's maturity date; for a borrower-lessee, the right to assign, transfer, mortgage and sublease an unlimited number of times without a credit review of the new party; protection of the lender in a condemnation; notice to the lender of a lessee default within 30 days and at least 30 days for the lender to cure, take over the lease or foreclose before any forfeiture; at least 30 days' notice before the ground lease is terminated; and no merger of the lessor's and lessee's titles that impairs the leasehold without the lender's consent. If the lease gives the borrower an option to buy the land, it must be at the borrower's sole option with no deadline. Renewal options that haven't been exercised don't count toward the minimum term.