Use of Assets from a Non-Borrowing Purchaser for the Mortgage Transaction

Although Fannie Mae’s guidelines were silent, they had the following unwritten rule:

A non-borrowing purchaser may contribute assets to the transaction with it being considered a gift if they execute the sales contract, the deed, and the security instrument and provide a letter of explanation that the funds do not represent a loan to the borrower and that no repayment is required.

Since this was not an actual Selling Guide policy, Fannie Mae did not issue a Selling Guide announcement however, they have updated Ask Poli to clarify that a non-borrowing purchaser may contribute assets to the transaction, but gift guidelines must be followed. Below is the information from Ask Poli:

Funds from a non-borrower purchaser, i.e., an individual who is purchasing the property with the borrower but is not themselves a Borrower on the mortgage loan, may not be considered Borrower funds unless they are from an acceptable source as outlined in the Fannie Mae Selling Guide.

Eligible sources include personal gifts provided the non-borrower purchaser is an eligible donor and the transaction complies with B3-4.3-04, Personal Gifts.  

*Please note – this change does not impact Arc Access and Arc Edge loans

Use of Rental Income from a Non-Subject Investment Property or 2- to 4-Unit Primary Residence Purchased or Placed in Service in the Current Calendar Year

Freddie Mac Selling Guide Section 5306.1

The lease must be used to determine the net rental income.

Note: If the property is not yet rented and the lease is not available, rental income may not be used to qualify.

The lease, if available, must be used to determine the net rental income.

For a non-subject investment property:

Guide Form 72, Small Residential Income Appraisal Report, or Form 1000, Single Family Comparable Rent Schedule, as applicable, may be used to document and calculate rental income when all of the following apply:

·         Property was purchased on or up to 45 days before the Note Date of the subject transaction

·         Lease is not available because the property is not yet rented

·         Each Borrower currently owns or rents a Primary Residence

·         Net rental income is used only to offset the monthly payment, unless at least one Borrower has a minimum of one year of investment property management experience

For a non-subject 2- to 4-unit Primary Residence:

Form 72 may be used to document and calculate rental income when all of the following apply:

·         Property was purchased on or up to 45 days prior to the Note Date of the subject transaction

·         Lease is not available because the property is not yet rented