The full explanation
These contributions can pay your closing costs, including prepaid items, but not your down payment or your reserves. Fannie Mae sets a cap that depends on how much you borrow compared with the value and on how you will use the home; anything above the cap or above your closing costs is subtracted from the sales price.
An example
The builder offers to pay part of Natalia's closing costs if she buys a new home. Her lender checks that the help does not go over Fannie Mae's cap or her actual closing costs.
You will see it in…
- The purchase offer or the builder's contract
- Seller credits on the Loan Estimate and Closing Disclosure
- Ads for new homes with help on closing costs
