Guideline answers · Fannie Mae
Fannie Mae · Assets
Does Fannie Mae allow a gift of equity?
Yes, on a principal residence or second home purchase. The seller must be an acceptable gift donor, the gift can cover the down payment and closing costs but not reserves, and the file needs a signed gift letter and a settlement statement that lists the gift of equity.
Checked against the sources below on October 29, 2026. Reviewed by Chris Black, NMLS 275073, on November 2, 2026.
The rules
- A gift of equity is part of the seller's equity, passed to the buyer as a credit in the transaction.
- Eligible: principal residence and second home purchases.
- It can fund all or part of the down payment and closing costs, including prepaid items. It cannot be used for reserves.
- The donor and minimum contribution rules for personal gifts (B3-4.3-04) apply, including 5% of the borrower's own funds on a two- to four-unit principal residence or second home above 80% LTV.
- From an acceptable donor, it is not an interested party contribution and does not count against the IPC limits.
- Keep a signed gift letter and the settlement statement listing the gift of equity.
Watch for
- The section's own date is 10/07/2020. Do not confuse it with the Guide edition date.
Sources
Fannie Mae Selling Guide, B3-4.3-05 Gifts of Equity
A gift of equity is permitted for principal residence and second home purchase transactions; can be used to fund all or part of the down payment and closing costs (including prepaid items); and cannot be used towards financial reserves.
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