The mortgage industry behemoth Fannie Mae has issued a letter to lenders with a revised set of guidelines stating that mortgage lenders could now provide assistance to borrowers as a gift that is not subject to repayment. This could cover some or all of the closing costs associated with the purchase of a home.
Many times, it is negotiated in the purchase contract that the seller covers some or all of the closing costs that are normally the buyer's responsibility. But in this red-hot housing market which has seen the lowest levels of available housing inventory on record, it is becoming more common for the seller to not have to pay the closing costs of the buyer as an incentive to purchase the home.
The money cannot go toward the down payment or surpass the closing costs, but otherwise there is no cap on the amount.
“We’re making it easier for borrowers to purchase a home by allowing lenders to fund closing costs and prepaid fees,” Fannie Mae Chief Credit Officer for Single-Family Carlos Perez said in a letter to lenders.
“While there is no limit to the amount of the lender-sourced contributions, the funds cannot be used toward a down payment, cannot exceed the total closing costs, and should not be subject to any form of repayment agreement,” Perez added.
Source: Fannie Mae