When it comes to securing a conventional loan, understanding borrower contribution requirements can play a pivotal role in your home-buying success. By knowing what’s expected, you can navigate the process with confidence. Did you know that specific property types come with their own borrower contribution guidelines? Here’s a breakdown of the key requirements:

Primary 2-4 Unit Homes
If you’re looking to purchase a primary residence with 2 to 4 units, you’ll need to contribute at least 5% of your own funds before accepting any gifts. This requirement ensures you have a vested financial interest in the property. Keep in mind, this doesn’t include the 6 months’ worth of Principal, Interest, Taxes, and Insurance (PITI) reserves that must also be factored in. These reserves provide a safety net for both you and the lender, ensuring you’re equipped to handle your mortgage payments.

Second Homes
Planning to buy a second home with a Loan-to-Value (LTV) ratio above 80%? You’ll need to contribute a minimum of 5% of your own funds. This requirement helps maintain your personal financial commitment to the property, which is especially important for second homes that may not generate rental income.

Primary Single-Family Homes
Here’s some good news for buyers of primary single-family homes: There’s no minimum borrower contribution requirement! This means you can cover your entire down payment and closing costs with a gift. This flexibility can be a major advantage for first-time buyers or those without large savings, but who are fortunate enough to have family members ready to lend a hand.

Why These Requirements Matter
Understanding these borrower contribution requirements is crucial when planning your finances. By preparing ahead, you can smooth the approval process and avoid any surprises along the way.