What Are Interested Party Contributions
Interested party contributions are funds that come from people or companies who benefit financially from your home purchase. These parties want the sale to close at the highest possible price because it increases their profit.
The most common interested parties include the property seller, builder or developer, your real estate agent, and any companies affiliated with these parties. Your lender counts as an interested party only if they're also the seller or have a business relationship with the seller.
Say you're buying a new construction home for $400,000. The builder offers to pay $8,000 of your closing costs. That $8,000 is an interested party contribution because the builder profits from the sale and wants to ensure it closes.
Two Types of Interested Party Contributions
Fannie Mae divides IPCs into two categories: financing concessions and sales concessions. Understanding the difference matters because they're treated differently in your loan approval.
Financing Concessions
Financing concessions help pay for legitimate costs you'd face anyway. These include your closing costs, prepaid items like property taxes and insurance, and homeowners association fees for up to 12 months after closing.
Your seller offers to pay $6,000 toward your closing costs on a $300,000 home purchase. This counts as a financing concession because closing costs are a normal part of buying a home.
Sales Concessions
Sales concessions are extras that go beyond normal homebuying costs. These include cash gifts, furniture, cars, moving expenses, decorator allowances, and agent rebates that aren't credited to your transaction.
The builder throws in a $15,000 car as part of your home purchase deal. This counts as a sales concession because a car isn't a normal homebuying expense.
Maximum Limits on Financing Concessions
Fannie Mae caps financing concessions at 3% of your home's value for loans above 90% loan-to-value ratio. For loans at 90% LTV or below, you can receive up to 6% in financing concessions.
The limit is calculated using the lower of your sales price or appraised value, not your loan amount. If you're buying a $400,000 home with a 95% LTV loan, your maximum financing concessions would be $12,000 (3% of $400,000).
Financing concessions also cannot exceed your actual closing costs. If your closing costs total $8,000 but the seller offers $10,000, the extra $2,000 becomes a sales concession.
How Sales Concessions Affect Your Loan
Sales concessions get subtracted from your home's sales price before calculating your loan-to-value ratio. This reduction can push your LTV higher than expected and potentially disqualify your loan.
You're buying a $300,000 home with a $285,000 loan (95% LTV). The seller includes $10,000 worth of furniture as part of the deal. Fannie Mae subtracts this sales concession from the purchase price, making your effective purchase price $290,000. Your LTV jumps to 98.3% ($285,000 ÷ $290,000), which may exceed program limits.
Required Documentation
Your lender must identify and document all interested party contributions in your loan file. This includes reviewing your sales contract, loan estimate, appraisal report, and settlement statement for any contributions.
The appraiser must know about all IPCs when valuing your property. Your lender provides this information to ensure the appraisal reflects the true market value without artificial inflation from interested party incentives.
Common documents that reveal IPCs include:
- Purchase agreement and any addenda
- Builder incentive worksheets
- Real estate agent commission agreements
- Settlement statements showing all transaction credits
Why These Rules Exist
Fannie Mae limits interested party contributions to prevent artificial inflation of home values and ensure you have genuine investment in your property. When sellers or builders offer excessive incentives, it can mask the true market value of the home.
The rules also protect against situations where you might appear to have more cash invested than you actually do. If a builder pays your down payment through inflated pricing, you haven't demonstrated the financial capacity that the down payment requirement is designed to measure.
Common Situations That Trip Up Borrowers
Builder incentives often exceed Fannie Mae limits, especially in competitive markets. A builder might offer $20,000 in incentives on a $400,000 home, but only $12,000 counts as allowable financing concessions. The remaining $8,000 becomes a sales concession that reduces your purchase price.
Real estate agent rebates can create problems if not handled properly. If your agent gives you a $3,000 rebate outside of closing, it counts as an undisclosed IPC and makes your loan ineligible for Fannie Mae purchase.
Payment abatements are never allowed, even if disclosed. If the seller offers to make your first three mortgage payments, your loan cannot be sold to Fannie Mae regardless of how the arrangement is documented.
Interest Rate Buydowns and Standby Commitments
When an interested party pays for a temporary or permanent interest rate buydown, the cost counts toward IPC limits. Your lender must calculate the discount points being paid and ensure the total stays within allowable financing concessions.
Standby commitments work differently. These are agreements between builders and lenders made before you sign a purchase contract. Since they're not specific to your transaction, they don't count as IPCs. Your loan will be delivered with a special feature code (SFC 887) to identify the standby commitment.
What Doesn't Count as IPCs
Some contributions are specifically excluded from IPC calculations. Lender credits from premium pricing don't count, even if your lender has a business relationship with the seller.
Gift funds from a seller who qualifies as an acceptable donor under gift fund rules [[B3-4.3-04]] are also excluded, provided the seller isn't a builder or other interested party and meets all gift fund requirements.
Legitimate real estate tax credits in areas where taxes are paid in arrears don't count as IPCs. These represent actual credits you're entitled to receive.
References
For the official guidelines, see B3-4.1-02: Interested Party Contributions (IPCs) in the Fannie Mae Selling Guide.
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Original Fannie Mae Guideline Text
B3-4.1-02, Interested Party Contributions (IPCs) (05/07/2025)
Overview
Interested party contributions (IPCs) are contributions made by third parties with a vested interest in the transaction. These funds are used to cover costs that are typically the buyer's responsibility. IPCs may include financing or sales concessions, as described below. Fannie Mae does not permit IPCs to be used to make the borrower's down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.
Fannie Mae considers the following to be IPCs:
funds paid directly by an interested party to the borrower;
funds that flow through a third-party organization, including nonprofit entities, from the interested party to the borrower;
funds provided to the transaction on the borrower's behalf by an interested party, including a third-party organization or nonprofit agency; and
funds donated by an interested party to a third party, which then pays some or all of the closing costs for a specific transaction.
Interested Parties
Interested parties to a transaction include, but are not limited to:
the property seller,
the builder or developer,
the real estate agent or broker,
any affiliate of the above, or
any party that can benefit from the sale of the property at the highest price and influence the sales price or real estate transaction
(For Fannie Mae's purposes, an affiliation exists when there is direct common ownership or control by the lender over the interested party, by the interested party over the lender or by a third party over both.)
Note: A lender or employer is not considered an interested party to a sales transaction unless it is the property seller or is affiliated with the property seller or another interested party to the transaction.
Financing Concessions
Financing concessions are financial contributions towards the loan transaction from interested parties. Financing concessions are acceptable when they are contributed towards:
Borrower closing costs, including prepaids; or
Borrower homeowners' association (HOA) assessments covering any period after the settlement date (limited to no more than 12 months).
Maximum Financing Concessions
The table below provides maximum financing concessions, which are calculated using the lower of the sales price or appraised value (not the loan amount) of the subject transaction. Typical fees and/or closing costs paid by a seller in accordance with local custom, known as common and customary fees or costs, are not subject to Fannie Mae maximum financing concessions.
Financing concessions that exceed the below limits are considered sales concessions and must be deducted from the property's sales price. As a result, the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value. Additionally, financing concessions must be equal to or less than the sum of the borrower's closing costs. Any amount exceeding the borrower's closing costs must be treated as a sales concession. See Sales Concessions below.
3%
See B5-4.2-03, Loans Secured by HomePath Properties for an exception to this limit for principal residence transactions.
Sales Concessions
Sales concessions are IPCs that take the form of non-realty items and may be paid prior to, at or after closing of the transaction. They include, but are not limited to:
contributions such as cash/cash-like gifts;
rebates, such as those from real estate agents or brokers, which are not credited towards the transaction;
furniture, automobiles, decorator allowances, moving costs, and other giveaways;
lender incentives as described in B3-4.1-03, Lender Incentivesfrom a lender who is, or is affiliated with, an interested party; and
financing concessions that exceed the maximum financing concessions.
Sales concessions must be deducted from the property's sales price and the lower of the reduced sales price or appraised value must be used to calculate LTV/CLTV ratios for underwriting and eligibility purposes.
IPC Exclusions
The following are not considered to be IPCs and are not subject to the requirements described in this topic.
A lender credit derived from premium pricing, even if the lender is an interested party to the transaction;
Gift funds or gift of equity from a seller who is also an acceptable donor provided that:
The donor is not a builder, or another interested party, and has no affiliation with any other interested party to the transaction, and
All requirements pertaining to gift funds and gift of equity from an acceptable donor as stated in B3-4.3-04, Personal GiftsandB3-4.3-05, Gifts of Equityare met;
A legitimate pro-rated real estate tax credit in places where real estate taxes are paid in arrears; and
Fees for standby commitments (refer to Interest Rate Buydowns section below).
Undisclosed IPCs
Mortgages with undisclosed IPCs are not eligible for sale to Fannie Mae. Examples of these types of contributions include, but are not limited to
moving expenses,
payment of various fees on the borrower's behalf,
"silent" second mortgages held by the property seller, and
other contributions that are given to the borrower outside of closing and are not disclosed on the settlement statement.
Interest Rate Buydowns
If a temporary or permanent interest rate buydown is being offered to the borrower, and the subsidy is funded by an interested party or a lender affiliated with one, the cost of that subsidy must be included in the IPC calculation.
The lender must ensure the subsidy cost meets Fannie Mae's allowable maximum financing concessions. This can be accomplished by confirming the current market interest rate (that is, the rate without the payment of any discount points) and the discount points being charged to obtain the interest rate offered with the buydown.
Note: Standby commitment (also known as forward commitment) agreements between a builder and lender for blanket interest rate coverage that are executed prior to signing a sales contract with a borrower are not subject to Fannie Mae's maximum financing concessions because they are not attributable to the specific loan transaction. Loans with a reduced interest rate due to a standby commitment must be delivered with SFC 887.
Payment Abatements
Loans with any type of payment abatement are not eligible for sale to Fannie Mae, even if they are disclosed on the settlement statement. This prohibition applies when an interested party funds the abatement directly and/or through another entity, such as a nonprofit down payment assistance program.
Note: The payment of HOA fees is not considered an abatement unless the payment of the fee extends for more than 12 months. Paying HOA fees for 12 months or less is considered an interested party contribution.
Lender Checklist for IPCs
The lender must ensure that all of the following requirements for an IPC are satisfied.
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Lender Checklist for IPCs
Ensure that any and all IPCs have been identified and taken into consideration.
Provide the appraiser with all appropriate financing data and IPCs for the subject property granted by anyone associated with the transaction.
Ensure that the property value is adequately supported.
Ensure that the LTV and CLTV ratios, after any IPCs are taken into consideration, remain within Fannie Mae’s eligibility limits for the particular product.
Ensure that the level of mortgage insurance coverage, if applicable, has been obtained, based on the standard LTV ratio after any IPC adjustments have been made.
Scrutinize all loan and sales contract documents, including but not limited to the sales contract, the loan estimate, the loan application, the appraisal report, and the settlement statement.
Ensure that all elements of the settlement statement were taken into consideration during the underwriting process.
Ensure that fees and expenses are consistent between all documents. Analyze any differences and review any discrepancies.
