Freddie Mac Single-Family Seller/Servicer Guide 4305.1 — General requirements for all purchase transaction Mortgages

Freddie Mac Single-Family Seller/Servicer Guide 4305.1 — General requirements for all purchase transaction Mortgages

Effective 2026-06-03 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Purchase transaction definition ■ Overpayment of costs, fees and charges ■ Gifts funds or gift of equity exceeding the amount needed for closing ■ Required documentation ■ Impact of cash back on minimum Borrower contribution (a) Purchase transaction definition A purchase transaction Mortgage is a Mortgage for which the proceeds are used for one of the following: ■ Acquire the Mortgaged Premises ■ Acquire the Mortgaged Premises and finance improvements to the property as permitted under the Seller’s Purchase Documents ■ Pay off the Interim Construction Financing in accordance with the requirements of Chapter 4602 for Construction to Permanent Mortgages and Renovation Mortgages ■ Pay off the outstanding balance under a land contract or contract for deed in accordance with requirements of Chapter 4404 (b) Overpayment of costs, fees and charges The Borrower may receive cash back, or a principal curtailment may be made, as a reimbursement for the overpayment of costs, fees and charges paid by the Borrower. Examples of such overpayments may include: ■ An earnest money deposit exceeding the required Down Payment amount ■ A fee paid at loan application that is covered by a financing concession (as described in Section 5501.6(b)) at loan closing ■ A Closing Cost that is reduced after closing Additionally, the Borrower may receive cash back, or a principal curtailment may be made, as a result of the following: ■ In jurisdictions where real estate taxes are paid in arrears, receipt of funds from the property seller for real estate taxes that cover a period prior to the Note Date ■ Refunds mandated by federal laws or regulations (c) Gift funds or gift of equity exceeding the amount needed for closing Gift funds exceeding the amount needed for closing may be: ■ Disbursed to the Borrower as cash back, which includes pay off or pay down of the Borrower’s debt, and/or ■ Applied as a principal curtailment A gift of equity exceeding the amount needed for closing may only be: ■ Used to pay off or pay down the Borrower’s debt at closing when paid by the property seller to the creditor, and/or ■ Applied as a principal curtailment (d) Required documentation Any cash back, pay off or pay down of debt or principal curtailment, as described above, must be reflected on the Settlement/Closing Disclosure Statement. In instances of reimbursement for the overpayment of costs, fees and charges, and/or refunds mandated by federal law or regulation, the Mortgage file must include documentation supporting the amount and the reason for the reimbursement and/or refund. (e) Impact of cash back on minimum Borrower contribution The minimum Borrower contribution, if applicable, must be met at closing as described in: ■ Section 5501.3(k) for certain Mortgages secured by second homes, Mortgages secured by Investment Properties and Mortgages with shared equity plans ■ Section 4501.7 for Home Possible® Mortgages ■ Section 4504.7(a) for HeritageOne® Mortgages If the projected cash back, as described above, results in the Borrower not meeting the minimum Borrower contribution at closing, the excess amount of the cash back must be applied as a principal curtailment.

Source: Freddie Mac Single-Family Seller/Servicer Guide 4305.1 — General requirements for all purchase transaction Mortgages · source URL · snapshot 4c94f67729042dd6