In today’s competitive housing market, affordability remains a top concern for many borrowers. As mortgage professionals, we’re constantly seeking ways to help buyers overcome financial hurdles without compromising loan quality or compliance. One powerful tool in our arsenal? Interested Party Contributions (IPCs).
Jody Hanson, Regional Underwriter at Enact, dives into what IPCs are and how they’re more than just a line item on the Closing Disclosure—they’re a strategic lever that can make homeownership more accessible.
What are Interested Party Contributions?
Interested Party Contributions are financial concessions/ funds provided by parties with a vested interest in areal estate transaction, typically the seller, builder, developer, or real estate agent. Closing costs causing concern for your borrowers?
These contributions help cover costs that would normally fall on the buyer, such as:
- Loan origination fees
- Appraisal costs
- Title insurance
- Recording fees
- Prepaid items like property taxes or homeowners insurance
Importantly, IPCs are not gifts or direct cash to the buyer. They appear as credits on the Closing Disclosure and reduce the amount of cash the buyer needs at closing.
Who qualifies as an "Interested Party"?
According to Fannie Mae and Freddie Mac guidelines, interested parties include:
- The property seller
- The builder or developer
- The real estate agent or broker
- Any affiliate of the above (e.g., same ownership or control)
Lenders and employers are generally not considered interested parties unless they are also the seller or affiliated with one.
Types of Interested Party Contributions: financing vs. sales concessions
Understanding the distinction between financing and sales concessions is key to ensuring guidelines are accurately followed:
Financing Concessions
These are contributions toward the loan transaction, such as:
- Closing costs
- Prepaid HOA dues (up to 12 months)
- Discount points to lower interest rates
Sales Concessions
These include non-financing incentives like:
- Free upgrades in new construction
- Furniture or appliances
- Seller-paid moving expenses
Sales concessions are more tightly regulated because they can inflate the property’s value and affect loan-to-value (LTV) ratios.
Limits and restrictions on Interested Party Contributions
Lenders must adhere to IPC limits based on loan type and down payment:
Note: IPCs cannot be used to meet minimum borrower contribution requirements or financial reserves.
Why Interested Party Contributions are Important
In today’s lending landscape, every dollar counts, especially for first-time homebuyers who are navigating rising costs and tight budgets. But they don’t only help borrowers, they’re also a strategic advantage for everyone involved in the loan transaction.
For buyers, IPCs can:
- Reduce upfront costs
- Make homeownership more attainable
- Improve affordability in competitive markets
For sellers and builders, IPCs:
- Help close deals faster
- Make listings more attractive
- Offer flexibility in negotiations
IPCs represent a compliant, strategic way to support borrowers, without compromising loan integrity.
Final considerations for Interested Party Contributions
Interested Party Contributions can be a powerful tool in real estate transactions—but they must be used carefully and transparently. Buyers should work closely with their lender to ensure IPCs are properly documented and within allowable limits. Sellers and agents should understand how IPCs affect pricing, appraisal, and loan approval.
As professionals in the mortgage space, it’s our responsibility to educate borrowers and partners about IPCs. When used correctly, they can be the difference between a missed opportunity and a closed loan.
For the most up-to-date information on how the GSEs view IPCs, always reference their selling guides – access Fannie Mae and Freddie Mac guidelines.
More ways we at Enact can help
Want to dive deeper into IPCs or share your experience using them in a transaction? Let’s keep the conversation going—because when we understand the tools available, we can empower more families to achieve the dream of homeownership. Our Regional Underwriting Team is available to assist you Monday-Friday 8am to 8pm ET at 800-444-5664 option 2.
Enact also offers a suite of tools—including Rate Express®, Underwriting Resources, and training resources to help you along the mortgage origination journey.
Source: Jody Hanson is a Regional Underwriter at Enact Mortgage Insurance.
The statements in this article are solely the opinions of Jody Hanson and do not necessarily reflect the views of Enact or its management.
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