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© Freddie Mac Single-Family Seller Servicer Guide

This section describes eligibility and documentation requirements for sources of funds used to qualify the Borrower for the Mortgage transaction. Eligible sources of funds are listed in the charts in Sections 5501.3(b)(ii) and 5501.3(c) below.

(a) General documentation requirements

All documentation of funds used to qualify the Borrower for the Mortgage transaction must meet the requirements of this section and Sections 5102.3 and 5102.4.(i) Requirements for direct account verifications and asset account statementsDirect account verifications and asset account statements used to verify the Borrower's accounts held in financial institutions must meet the following additional requirements:

Direct account verifications (i.e., verification of deposit form (VOD)) must:
- Identify the financial institution
- Identify the account owner(s)
- Identify the account number, which at a minimum must include the last four digits
- Identify the type of account
- Identify account open date
- Identify the current account balance
- Identify the average balance for the previous two months
- Identify any outstanding loans secured by the asset
- Include the title, signature and phone number of the depository representative who completed the verification
When using a direct account verification, the Seller must include documentation of the source of funds when an account is opened within 90 days of verification and/or when the current balance in an account is significantly greater than the average balance.

Asset account statements must:
- Identify the financial institution
- Identify the account owner(s)
- Identify the account number, which at a minimum must include the last four digits
- Show all transactions
- Show the period covered
- Show the ending balance
- Show any outstanding loans secured by the asset
A transaction history that is computer-generated and downloaded by the Borrower from the Internet or by a financial institution representative from the institution's system is acceptable. The transaction history must identify the name of the institution and the source, and includes the information required above for asset account statements, unless:
- It is used in combination with other asset verifications containing the missing information, and
- It can clearly establish that the transaction history pertains to the same account

(ii) Third-party asset verifications

Asset verifications obtained through third-party verification service providers are acceptable. The verifications must be received by the originator directly from the third-party verification service provider and must contain the same information as required for direct account verifications or asset account statements above.However, when the verification is generated electronically and is not completed or provided by a representative of the employer or the depository institution, as applicable, the representative's information is not required.If any required information is missing, the Seller must obtain additional documentation to supplement the third-party verification. The Seller is responsible for ensuring the accuracy and integrity of the information provided by the third-party verification services.

(iii) Evaluation of deposits in the Borrower's accounts

(A) Deposits requiring verification

Except as stated below, the Seller is not required to document the sources of unverified deposits for purchase or refinance transactions. However, when qualifying the Borrower, the Seller must consider any liabilities resulting from all borrowed funds.For purchase transactions, when evaluating deposits in the Borrower's accounts, the following requirements apply:

The Seller must document the source of funds for any single deposit exceeding 50% of the total monthly qualifying income for the Mortgage, otherwise referred to as a "large deposit," if the deposit is needed to qualify the Borrower for the Mortgage transaction
When a single deposit consists of both verified and unverified portions, the Seller may use just the unverified amount when determining whether the deposit is a large deposit as described above
When a large deposit is not verified and is not needed to qualify the Borrower for the Mortgage transaction, the Seller must reduce the funds used for qualification purposes by the amount of the unverified deposit. For Loan Product Advisor® Mortgages, the Seller must enter the reduced amount of the asset into Loan Product Advisor.
When the source of funds can be clearly identified from the deposit information on the account statement (e.g., direct payroll deposits) or other documented income or asset source in the Mortgage file (e.g., tax refund amounts appearing on the tax returns in the file), the Seller is not required to obtain additional documentation.

(B) Acceptable sources of deposit

When a deposit requires verification as stated above, the Seller must determine:

Whether the source of the deposit is acceptable
That the funds belong to the Borrower, and
That the funds are eligible for the transaction

Acceptable sources include, but are not limited to:

The Borrower's income
Funds awarded to the Borrower (e.g., disaster relief funds, lottery winnings, court-awarded settlement) provided the source is not an interested party to the real estate or Mortgage transaction
Funds derived from eligible asset types stated in Sections 5501.3(b) and 5501.3(c) below

(b) Special requirements for Borrower personal funds(i) Minimum Borrower contribution

For a purchase transaction Mortgage, the Borrower must make a minimum contribution from Borrower personal funds when specifically required in the Guide, as summarized in the chart below.

Minimum contribution from Borrower personal funds
Mortgage type	Guide section number	Mortgages with LTV/TLTV/HTLTV ratios ≤ 80%	Mortgages with LTV/TLTV/HTLTV ratios > 80%
Mortgage secured by a 1- and 2-unit Primary Residence	N/A	None
Mortgage secured by a 1- and 2-unit Primary Residence	N/A	None
Mortgage secured by a 3- and 4-unit Primary Residence	N/A	None	N/A
Mortgage secured by a second home	5501.3(c)	None	5% of value, when gift funds or grants are used for the transaction
Mortgage secured by an Investment Property	4201.16	All funds used for the transaction must be Borrower personal funds
Mortgages with shared equity plans	4204.5	5% of value (must be Owner-Occupant's personal funds)

See Section 4501.10 for requirements for minimum contribution from Borrower personal funds for Home Possible® Mortgages.(ii) Eligible asset types and documentation requirements for Borrower personal fundsAsset types that are considered Borrower personal funds and the applicable documentation requirements are described in the chart below. The eligibility and documentation requirements apply to all funds used to qualify the Borrower for the Mortgage transaction, including reserves. Any limitations on the use of an asset type are specified in the chart.All accounts held in financial institutions must be owned by the Borrower and the Borrower must have access to the funds. Funds in accounts that are owned jointly by the Borrower and a non-Borrower are considered Borrower personal funds.For Loan Product Advisor Mortgages, the Documentation Level shown on the Feedback Certificate indicates the minimum level of documentation acceptable for a Loan Product Advisor Mortgage. The Seller must provide the documentation required in this chapter for the Documentation Level returned.All Manually Underwritten Mortgages must at least be documented according to Standard Documentation.

Asset type and eligibility requirements	Streamlined Accept documentation requirements	Standard documentation requirements
1. Depository accounts Depository accounts used to deposit and withdraw cash, such as: Checking Savings Money market Certificate of deposit (CD) Other depository accounts	Provide an account statement covering a one-month period or a direct account verification (i.e., VOD)	Provide account statement(s) covering a two-month period or a direct account verification (i.e., VOD)
2. Securities Securities that are traded on an exchange or marketplace, generally available to the public such as: Stocks Vested stock options Bonds Mutual funds United States government securities Other securities Value must not include margin accounts. Restricted stock is not eligible.	Provide an account statement covering a one-month period or a direct account verification (i.e., VOD)	Provide account statement(s) covering a two-month period or a direct account verification (i.e., VOD)
	If the Borrower does not receive a stock/security account statement: Provide evidence the security is owned by the Borrower, and Verify value using current stock prices from a financial publication or web site See below for when evidence of liquidation is required*
3. Retirement accounts Independent retirement accounts and Internal Revenue Service (IRS)-qualified employer retirement plan accounts such as: 401K 403b IRAs (traditional and Roth) SEP-IRA SIMPLE-IRA KEOGH MyRA State retirement savings plans Other independent and IRS-qualified employer retirement plan accounts	Provide an account statement covering a one-month period or a direct account verification (i.e., VOD)	Provide account statement(s) covering a two-month period or a direct account verification (i.e., VOD)
	See below for when evidence of liquidation is required* When evidence of liquidation is not obtained: In order to use the vested amount of an IRS-qualified employer retirement account to qualify the Borrower for the Mortgage transaction, the Mortgage file must include documentation confirming that the Borrower is permitted to make withdrawals, and severance from the Borrower's current employment is not required.
4. Government bonds (federal, state or municipal) The value used must be based on the lower of the purchase price or current redeemable value.	Provide documentation verifying the ownership and the value. See below for when evidence of liquidation is required.*
5. Proceeds from a loan fully secured by the Borrower's assets other than real property The loan must not be provided by an interested party to the real estate or Mortgage transaction. When the loan is secured by a financial asset used to qualify the Borrower for the Mortgage transaction, the value of the asset must be reduced by the amount of the loan proceeds and any associated fees.	Provide the following: Documentation verifying the value and ownership of the asset used to secure the loan as well as the amount and terms of the loan Evidence of receipt of the loan proceeds
6. Proceeds from the sale or refinance of the Borrower's real property (including proceeds from a 1031 exchange or a bridge loan) For refinance Mortgages, the cash-out proceeds from the subject cash-out refinance transaction and any cash back received on the subject "no cash-out" refinance transaction are not eligible sources of funds for reserves.	Provide the following: The Settlement/Closing Disclosure Statement verifying the proceeds from the sale or refinance of the Borrower's real property – For Mortgages with Application Received Dates prior to October 3, 2015, the Settlement/Closing Disclosure Statement must be signed by the buyer and the seller, or their authorized agents, and/or An executed buy-out agreement that is part of an employer relocation plan that takes responsibility for the outstanding Mortgage(s)
7. Proceeds from the sale of the Borrower's assets other than real property or exchange-traded securities The purchaser of the Borrower's asset must not be an interested party to the real estate or Mortgage transaction.	Provide the following: A signed bill of sale documenting the asset and transfer of ownership Evidence of receipt of the proceeds
8. Borrower's real estate commission Borrower's real estate commission is an eligible source of funds for Down Payment and/or Closing Costs when the Borrower is a licensed real estate agent that is due to receive a sales commission from their purchase of the subject property.	The Settlement/Closing Disclosure Statement must reflect the commission earned by the Borrower and credited toward the Mortgage transaction.
9. Funds from a trust The Borrower must be the beneficiary and have access to the funds as of the date of the loan closing. The Borrower's portion of undistributed trust funds may be used as reserves only.	Provide a copy of the trust agreement or a signed statement from the trustee or trust manager that documents the following information: Identifies the Borrower as the beneficiary Confirms that the Borrower has access to all or a certain specific amount of the funds Confirms that the trust has sufficient assets to disburse funds needed by the Borrower When trust funds are needed for closing, evidence of receipt of the disbursed funds from the trust is required.
10. Individual Development Account (IDA) – Agency matching funds not subject to Recapture With respect to the subject Mortgage, the Agency must not: Be the Seller or have participated in any aspect of the Mortgage origination process Be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination processFor these purposes, "affiliated with" means that the Agency and the Seller or other party are related to each other as a consequence of one entity directly or indirectly controlling the other party, being controlled by the other party or being under common control with that party. Any matching funds may be considered Borrower personal funds A maximum of a 4 to 1 match by an Agency's funds is permitted The Borrower must satisfy any vesting requirements of the matching IDA program	Provide documentation of the IDA program verifying: The matching funds are not subject to Recapture The ratio of matching funds by the Agency Regular payments made to the IDA by the Borrower and the matching organization The vested balance or the percentage of vesting
11. Community Savings System accounts – Borrower contributions Funds on deposit in a Community Savings System that are deposited by the Borrower. A non-profit community organization must administer the savings system.	Provide Community Savings Systems account statements or a direct account verification identifying the non-profit community organization as the administrator and showing all Borrower contributions.
12. Pooled funds Pooled funds are funds on deposit provided by the Borrower and other member(s) of a group of Related Persons who: Have resided together for at least one year, and Will continue residing together in the new residence, and Are "pooling" their funds to buy a home Funds provided by Related Persons who do not reside with the Borrower are subject to the requirements of the chart in Section 5501.3(c) for gift funds	Provide the following: Evidence that the Borrower and the Related Person have resided together for at least one year Documentation verifying the pooled funds per the requirements for the applicable asset type contained in this chart or the chart in Section 5501.3(c), as applicable A written statement from the Borrower, executed at application attesting to all of the following: The source of the pooled funds The fact that the pooled funds were not borrowed by the contributing Related Person The relationship between the contributing Related Person and the Borrower. (For example, the affidavit might state that the Related Person is the Borrower's uncle or that the Related Person is the cousin of the Borrower's spouse.) That the Related Person has resided with the Borrower for the past year and intends to continue residing with the Borrower in the new residence for the foreseeable future The written statement need not be notarized or acknowledged but must be kept in the Mortgage file.
13. Borrower's revolving credit card (charges/cash advances) or unsecured line of credit Borrower's revolving credit card (charges/cash advances) or unsecured line of credit used to pay fees associated with the Mortgage application process (e.g., origination fees, commitment fees, lock-in fees, appraisal, credit report and flood certifications) are subject to the following requirements: The maximum amount charged or advanced may not exceed the greater of 2% of the Mortgage amount or $1,500And The Borrower must have sufficient verified funds to pay these fees (in addition to the funds needed to qualify for the Mortgage transaction; however, the Borrower is not required to pay off these charges at closing; or The amount charged or advanced must be included in the Borrower's total outstanding debt and the repayment of such amount must be included when determining the Borrower's monthly debt payment-to-income ratio as described in Section 5401.2 Refer to Section 6302.30 for instructions on delivering Mortgages where the Borrower uses a credit card, cash advance or unsecured line of credit to pay fees associated with the Mortgage application process.	Provide the following: A copy of the account statement or receipt showing the amount charged or advanced, and Verification of sufficient funds to pay the amount charged or advanced if the amount charged or advanced is not included in the monthly debt payment-to-income ratio
14. Cash value of a life insurance policy (not the face value) The Borrower must be the owner of the policy and not the beneficiary.	Provide documentation from the life insurance company verifying the following information: Policy owner(s) Period covered and current cash value, and Any outstanding loans When cash value of the life insurance policy is needed for closing, evidence of liquidation is required.
15. Rent credits The portion of rental payments paid by the Borrower credited towards the Down Payment and/or Closing Costs under a documented rental/purchase agreement. The credit must not exceed the difference between the market rent and actual rent paid. The rental/purchase agreement must have an original term of at least 12 months and the rent must be based on a minimum of 12 months rental payments.	Provide the following: A copy of the rental/purchase agreement Evidence of rental payments (see Section 5202.2(b) for acceptable documentation for rental verification) Appraiser's determination of the market rent for the subject property
16. Trade equity: Net proceeds of the trade-in of the Borrower's previously owned residence The Borrower's equity in the previously-owned residence is determined by subtracting any outstanding liens on the previously-owned residence, plus any transfer costs, from the lesser of the appraised value of the previously-owned residence or its trade-in price as shown in the trade-in contract.	Provide the following: The appraisal of the Borrower's previously-owned residence A copy of the trade-in contract

*When assets that are invested in stocks, bonds, mutual funds, U.S. government securities, retirement accounts or other securities are needed for closing, evidence of liquidation is required unless the combined value of the assets is at least 20% greater than the amount from these assets needed for closing.

See Section 4501.10(c) for additional sources of Borrower personal funds for Home Possible® Mortgages.

(iii) Earnest money deposit (EMD)

When an EMD for a purchase transaction is used to qualify the Borrower for the Mortgage transaction, the Seller must obtain evidence that the EMD check cleared the Borrower's account (e.g., copy of the canceled check, asset account statement or written statement from the EMD holder verifying receipt of the funds).When the EMD is needed to meet the minimum contribution from Borrower personal funds, the Seller must:

Verify that the source of the EMD is an eligible asset type and document it in accordance with the applicable requirements in this section
Provide account statement(s) (based on Streamlined Accept or Standard documentation requirements, as applicable) or a direct account verification (i.e., VOD) that covers the period up to and including the date the EMD funds cleared the account

The EMD must not be counted twice in the evaluation of the Mortgage (i.e., deducted from the funds to close and counted in assets).

(iv) Business assets

Funds from a Borrower's business account may be used to qualify the Borrower for the Mortgage transaction, provided they meet the requirements of this chapter, except as stated below.Documentation of large deposits, as described in Section 5501.3(a)(iii), is not required provided that the Seller:

Reviews a minimum of the most recent two months of the business account statements, and
Determines the deposits are typical for the Borrower's business

See Section 5304.1(f) for additional requirements when self-employed income from the business is used for qualifying.

(v) Source of funds from outside the United States and its territories

When the source of funds needed for closing is, or otherwise originates from, asset(s) located outside the United States and its territories:

Funds must be transferred into a United States or State regulated financial institution and verified in U.S. dollars prior to the closing of the Mortgage transaction, or
Combined value of the assets must be at least 20% greater than the amount from these assets needed for closing

See Section 5102.3(b) for additional requirements when funds from outside the United States and its territories are used to qualify the Borrower for the Mortgage transaction.

(c) Special requirements for other eligible sources of funds

Other sources of funds eligible to be used to qualify the Borrower for the Mortgage transaction and the applicable documentation requirements are described in the chart below. The eligibility and documentation requirements apply to all funds used to qualify the Borrower of the Mortgage transaction including reserves. Any limitations on the use of an asset type are specified in the chart.For Loan Product Advisor Mortgages, the Documentation Level shown on the Feedback Certificate indicates the minimum level of documentation acceptable for a Loan Product Advisor Mortgage. The Seller must provide the documentation required in this chapter for the Documentation Level returned.All Manually Underwritten Mortgages must at least be documented according to Standard Documentation.

Asset type and eligibility requirements	Streamlined Accept and Standard Documentation requirements
1. Gift funds or a gift of equityGift funds or a gift of equity is an eligible source of funds for a Mortgage secured by a Primary Residence or second home provided that: The funds are from a Related Person, and The funds do not have to be repaid When a Mortgage is secured by a second home and the LTV/TLTV/HTLTV ratio is greater than 80%, the gift is permitted only if the Borrower has made a Down Payment of at least 5% from Borrower personal funds as described in Section 5501.3(b). Gift funds or gift of equity are not an eligible source of funds for Investment Property Mortgages.	Provide a gift letter signed by the donor. Information provided in the gift letter must: State the donor's name and that the funds are given by a Related Person Include the donor's mailing address and telephone number State the amount of the gift funds or gift of equity Establish that the gift funds or gift of equity are a gift that does not have to be repaid Gift funds: If the verifications provided in the Mortgage file do not show evidence that the gift funds have been deposited in the Borrower's account, the Borrower must provide evidence of the transfer of funds from the donor to the Borrower. Gift of equity: A gift of equity must be reflected on the Settlement/Closing Disclosure Statement.
2. Gift funds received as a wedding gift Gift funds received as a wedding gift from unrelated persons and/or Related Persons is an eligible source of funds for a Mortgage secured by Primary Residence. The gift funds must be on deposit in the Borrower's depository account within 60 days of the date of the marriage license or certificate.	Provide the following: A copy of the marriage license or certificate A verification of the gift funds in the Borrower's depository account
3. A gift or grant from an Agency A gift or grant from an Agency that does not have to be repaid is an eligible source of funds provided that: The gift or grant is given pursuant to an established program The Agency is not an interested party (as described in Section 5501.5); and The funds were not obtained from an interested party either directly or through a third party; and With respect to the subject Mortgage, the Agency must not: Be the Seller or have participated in any aspect of the Mortgage origination process Be affiliated with, under contract to, or financed (directly or indirectly) by the Seller or any party that participated in the Mortgage origination processFor these purposes, "affiliated with" means that the Agency and the Seller or other party are related to each other as a consequence of one entity directly or indirectly controlling the other party, being controlled by the other party or being under common control with that party. Gifts and grants from Agencies are not eligible sources of funds for second home and Investment Property Mortgages.	Provide documentation supporting a gift or grant from an Agency. Examples of acceptable documentation include copies of grant program materials, award letters or terms and conditions provided to the Borrower. The documentation must: Establish that the funds were provided by an Agency Establish that the organization has an established gift or grant program Establish that the funds are a gift or grant that does not have to be repaid Provide evidence that the funds were received by the Borrower or by the Seller on the Borrower's behalf Identify the donor's mailing address
4. Individual Development Account (IDA) – Agency matching funds subject to Recapture Agency matching funds subject to Recapture is an eligible source of funds provided that: The matching funds must be considered a gift or grant from an Agency as described in this chart A maximum of a 3-to-1 match by an Agency's funds is permitted The Borrower must satisfy any vesting requirements of the matching IDA program	Provide documentation of the IDA program verifying: The matching funds are subject to Recapture The ratio of matching funds by the Agency Regular payments made by the Borrower and the matching organization The vested balance or the percentage of vesting Documentation of matching funds subject to a Recapture provision must also meet the requirements of this chart for a gift or grant from an Agency, except that the Seller does not have to establish that the funds do not have to be repaid.
5. Proceeds from an unsecured loan that is an Employer Assisted Homeownership (EAH) Benefit Proceeds from an unsecured loan that is an EAH Benefit is an eligible source of funds provided that the eligibility and documentation requirements in Section 5501.4 are met.