source:
  type: guide
  id: fnma-sel-b3-4.3-06
  authority: Fannie Mae Selling Guide B3-4.3-06 — Grants and Lender Contributions
  description: Fannie Mae Selling Guide B3-4.3-06 — Grants and Lender Contributions.
  coverage_tier: operative
obligations:
- id: fnma-sel-b3-4.3-06-full
  canonical_id: fnma-sel-b3-4.3-06-full
  section: Fannie Mae Selling Guide B3-4.3-06 — Grants and Lender Contributions
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B3-4.3-06 — Grants and Lender Contributions
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B3-4.3-06, Grants and Lender Contributions (05/07/2025) Introduction
      This topic contains information on grants and lender contributions, including:
      Donations From Entities - Grants Minimum Borrower Contribution Requirements
      Documentation Requirements Lender-funded Grants Lender Contributions Donations
      From Entities - Grants Borrowers of a loan secured by a principal residence
      may use funds donated from acceptable entities for all or part of the down payment,
      closing costs, or ﬁnancial reserves subject to the minimum borrower contribution
      requirements described below. These funds are referred to as a grant. Grants
      must be funded by one of the following entities, provided they are not the property
      seller or other interested party in the transaction: a federal agency, state,
      county, or similar political subdivision of a state; any city, town, village,
      or borough of a state that has a local government and that has been created
      by a special legislative act, has been otherwise individually incorporated or
      chartered pursuant to state law, or is recognized as such under the constitution
      or by the laws of the state in which it is located, a housing ﬁnance agency
      as deﬁned in 24 C.F.R. §266.5; a nonproﬁt organization exempt from taxation
      under Section 501(c)(3) of the Internal Revenue Code; a regional Federal Home
      Loan Bank under one of its aﬀordable housing programs; an employer where the
      borrower is an employee (see B3-4.3-08, Employer Assistance); Published May
      6, 2026 429 an Indian tribe on the most current list published by the Secretary
      of the Interior pursuant to 25 U.S.C. §5131; or a lender (see Lender-funded
      Grants). Down payment assistance may not be funded in any way through the ﬁrst
      mortgage, such as through premium pricing. Grant funds may also be applied towards
      energy-related improvements if the program under which the funds are made available
      allows such a use, and the minimum borrower contribution requirements are met.
      Minimum Borrower Contribution Requirements The following table describes the
      minimum borrower contribution requirements for transactions that contain grants
      (excluding lender-funded grants). LTV, CLTV, or HCLTV Ratio Minimum Borrower
      Contribution Requirement from Borrower’s Own Funds 80% or less One- to four-unit
      principal residence A minimum borrower contribution from the borrower’s own
      funds is not required. All funds needed to complete the transaction can come
      from a grant. Greater than 80% One-unit principal residence A minimum borrower
      contribution from the borrower’s own funds is not required. All funds needed
      to complete the transaction can come from a grant. Two- to four-unit principal
      residence The borrower must make a 5% minimum borrower contribution from their
      own funds. After the minimum borrower contribution has been met, grants can
      be used to supplement the down payment, closing costs, reserves, and energy-related
      improvements. Documentation Requirements The grant must be documented with a
      copy of the letter awarding the grant to the borrower or a copy of the legal
      agreement that speciﬁes the terms and conditions of the grant. The document
      must include language indicating that repayment of the grant is not expected,
      and how the funds will be transferred to the borrower, Published May 6, 2026
      430 lender, or closing agent. The transfer of grants must be documented with
      a copy of the donor’s canceled check, a copy of the settlement statement showing
      receipt of the check, or similar evidence. The documentation must be included
      in the individual loan ﬁle. Lender-funded Grants A lender-funded grant is subject
      to the requirements described in this topic, but must also meet the requirements
      in the following table. ✓ Additional Requirements for Lender-funded Grants The
      loan must be a HomeReady loan used for a purchase transaction. See Chapter B5-6,
      HomeReady Mortgage for additional information. • One-unit principal residences:
      The borrower(s) must make a 3% contribution from their own funds, other eligible
      sources of funds as described in Chapter B3-4, Asset Assessment, or through
      a Community Seconds loan. • Two- to four-unit principal residences with LTV,
      CLTV, or HCLTV ratios 80% or less: The borrower(s) must make a 3% contribution
      from their own funds, other eligible sources of funds as described in Chapter
      B3-4, Asset Assessment, or through a Community Seconds loan. • Two- to four-unit
      principal residences with LTV, CLTV, or HCLTV ratios greater than 80%: The borrower(s)
      must make a 5% minimum contribution from their own funds. The lender must have
      a documented program that provides grants for low- to moderate-income borrowers,
      community development, equitable housing initiatives, or similar initiatives.
      Note: When a lender is only providing closing cost assistance, the Lender Contributions
      policy may be applied instead of the Lender-funded Grants policy. Lender Contributions
      The lender may provide the borrower with a contribution to fund borrower-paid
      closing costs and prepaid fees in the following cases: The lender credit is
      derived from premium pricing, as described in Premium Pricing in B2-1.5-02,
      Loan Eligibility. The lender credit is sourced directly from lender funds with
      no expectation for repayment or ﬁnancial obligation apart from the subject mortgage.
      Funds passed to the lender from a third party, for the purpose of providing
      a lender credit, are not eligible as a lender contribution. The amount of the
      lender contribution should not exceed the amount of borrower-paid closing costs
      and prepaid Published May 6, 2026 431 fees and may not be used to fund any portion
      of the down payment or ﬁnancial reserve requirements. Lender contributions are
      not considered grants. When the lender is an interested party to a purchase
      transaction, any amount of a lender contribution not derived from premium pricing,
      must be considered as an IPC when calculating the maximum ﬁnancing concessions
      for eligibility purposes. Any excess lender credit required to be returned to
      the borrower in accordance with applicable regulatory requirements is considered
      an overpayment of fees and charges and may be applied as a principal curtailment
      or returned in cash to the borrower. See B2-1.3-01, Purchase Transactions and
      B2-1.3-02, Limited Cash-Out Reﬁnance Transactions for treatment of the overpayment
      of fees and charges. Lenders may also provide borrowers with cash or cash-like
      incentives that do not need to be reﬂected on the settlement statement. See
      B3-4.1-02, Interested Party Contributions (IPCs) for additional information.
      Note: If a lender is required to provide down payment assistance to satisfy
      a legal settlement or judgement, enforcement action or other regulatory action,
      Fannie Mae will consider purchasing those loans on a negotiated basis. Lenders
      may contact their Fannie Mae customer account team for more information. Recent
      Related Announcements The table below provides reference to recently issued
      Announcements that are related to this topic. Announcement Issue Date Announcement
      SEL-2025-03 May 07, 2025 Announcement SEL-2022-10 December 14, 2022 Announcement
      SEL-2022-07 August 03, 2022 Announcement SEL-2021-08 September 01, 2021 Announcement
      SEL-2020-07 December 16, 2020'
  judgment: false
