Fannie and Freddie Expand Gift Donor List For Home Mortgages

File photo: Frontpage, Shutter Stock, licensed.
Headquartered in Washington DC, seen here on May 23, 2009, Fannie Mae is the largest U.S. home funding company. File photo: Frontpage, Shutter Stock, licensed.

DENVER, CO – The Federal National Mortgage Association (FNMA) – commonly known as Fannie Mae – and the Federal Home Loan Mortgage Corporation (FHLMC) – commonly known as Freddie Mac – announced late in 2022 that they have expanded their list of eligible gift donors of those who are looking to purchase a residence, giving prospective buyers a wider range of financial assistance going into 2023 and a greater shot at achieving the dream of home ownership.

Gift money takes the form of a cash donation that is typically given by a close relative that buyers can utilize to cover the costs of a down payment on a home, closing costs, and a variety of other fees associated with buying a house.

However, there are several rules and specific requirements associated with using gift funds for a home purchase, so it’s important to bear them in mind when doing so.

Previously, Fannie Mae and Freddie Mac had a narrower list of individuals from which homebuyers could procure gift money from; the main requirement was that the funds needed to come from a family member of the borrower, with a family member defined as being a spouse, fiancé, fiancée, or domestic partner; a child or other dependent; or an individual related by blood, marriage, adoption, or legal guardianship.

However, with Fannie Mae and Freddie Mac’s revised and expanded gift donor list, the pool of prospective sources of money can now also come from a domestic partner or their relative; a former relative; an unrelated individual with family-like ties, such as a godparent; and an estate or a trust established by a relative, such as gift funds or gifts of equity.

One exception to this expanded donor list is that family members or non-relatives who have a stake in the financial transaction itself – or are associated with someone else that does – cannot be gift donors.

In today’s difficult economic climate in the United States, saving the amounts of money needed to purchase a house can be hard, especially for first-time homebuyers. While some mistakenly believe that a down payment as much as 16 to 20 percent is required, in reality, a buyer is only required to put down an average of six or seven percent.

While that amount may seem attainable for those with financial issues, when you take into account that a six percent down payment on a home valued at $350,000 – which is considered on the low end of home prices as of late – would be $21,000, a first-time homebuyer may need as much outside help as they can get.

That’s where gift money can come in, as it can be an invaluable resource for buyers that have not been able to save as much as they would like to purchase a home. According to reports, in 2021 28 percent of younger millennials utilized gift money to finance some aspect of buying a house, typically lent to them via a relative or friend.

Gift money is allowed by the majority of institutions that offer conventional mortgages, but those supplying this money must adhere to certain requirements and said lenders will mandate that buyers disclose the exact source of their gift money.

To find out more about these new and expanded gift donor guidelines, please click on the following links for Fannie Mae and Freddie Mac, or consult with an expert of your choosing. But regardless of the path you take, there’s one thing to be sure of- that these expanded rules covering gift donors will enable more people in the United States to realize their dreams of home ownership, even in these difficult financial times.

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