Employer Assistance
Forms of Employer Assistance
Employer assistance is help from your job that can be used to pay for part of the upfront costs of buying a home. This includes help with your down payment (the initial payment when you buy a home) or closing costs (the fees you need to pay at the end of the home-buying process). Here are the types of assistance you might get:
– A grant, which is money you don’t have to pay back.
– A direct, fully repayable second mortgage or unsecured loan, which means you have to pay this money back.
– A forgivable second mortgage or unsecured loan, which is a loan you might not have to repay under certain conditions.
– A deferred-payment second mortgage or unsecured loan, which is a loan where you don’t have to start paying back right away.
You can use this assistance if you are buying your main home. However, you can’t use it for a second home or an investment property. The money must come directly from your employer or from an employer-affiliated credit union.
If your employer gives you a loan that is secured against your home (a second mortgage), there are specific rules. These loans can be part of a program called Community Seconds, or they must meet other Fannie Mae rules for loans that come in addition to your main mortgage.
If the loan from your employer doesn’t need you to make regular payments right away, the lender won’t count it as a debt when deciding if you can afford the loan. If you do have to make payments on the loan, these will be considered part of your monthly debts.
Minimum Borrower Contribution Requirements
Depending on the loan-to-value ratio (LTV, CLTV, or HCLTV Ratio) — basically, how much of the home’s price your loan covers compared to the home’s value — there are rules about how much money you need to put down from your own pocket:
– If the loan covers 80% or less of the home’s value, you don’t need to use any of your own money for a one- to four-unit main home. All the money can come from employer assistance.
– If the loan covers more than 80% of the home’s value for a one-unit main home, you also don’t need to use any of your own money. All the money can still come from employer assistance.
– For a two- to four-unit main home with a loan covering more than 80% of the home’s value, you must use at least 5% of your own money for the down payment. After that, you can use employer assistance for the rest of the down payment, closing costs, and financial reserves. However, unsecured loans (loans not secured against your home) can’t be used for reserves.
For people using the HomeReady mortgage program, there are specific rules about how much money needs to come from your own funds.
Documentation Requirements
Lenders need to check several things about the employer assistance:
– The assistance must be part of an official program by your employer, not just a special favor for you.
– They need to know the exact amount of help you’re getting.
– If your employer is giving you an unsecured loan, there needs to be an award letter or legal agreement showing the loan’s terms.
– They also need to check any other benefits you’re getting from your employer, like relocation help or gifts.
– Finally, it must be clear that you received the assistance directly from your employer or through an employer-affiliated credit union.
References
For more details, visit Employer Assistance of the Fannie Mae Selling Guide.