A purchase program stipulates a 3% interested-party contribution cap using a $340,000 eligible value base. Eligible borrower closing costs total $9,860, with no other contributions. The seller offers $6,000. What is the percentage-based ceiling, and does the offer fit both that ceiling and the eligible costs?
Correct Answer
C) The cap is $10,200, so the whole $6,000 contribution is allowed here
C. The percentage ceiling is $10,200 and the $6,000 offer fits both limits. $340,000 × 0.03 = $10,200. $6,000 is below both $10,200 and the $9,860 eligible costs. The effective usable amount cannot exceed eligible costs merely because the percentage ceiling is higher. Scope and exceptions: The 3% and eligible base are stipulated, not universal. Fannie Mae uses the lower of price or appraisal and varies limits by occupancy and LTV/CLTV; its contributions cannot fund down payment or reserves. Source: Overview and Maximum Financing Concessions — https://guide-selling.fanniemae.com/sel/b3-4.1-02/interested-party-contributions-ipcs
Why This Is the Correct Answer
C. The percentage ceiling is $10,200 and the $6,000 offer fits both limits. $340,000 × 0.03 = $10,200. $6,000 is below both $10,200 and the $9,860 eligible costs. The effective usable amount cannot exceed eligible costs merely because the percentage ceiling is higher. Scope and exceptions: The 3% and eligible base are stipulated, not universal. Fannie Mae uses the lower of price or appraisal and varies limits by occupancy and LTV/CLTV; its contributions cannot fund down payment or reserves.
Why the Other Options Are Wrong
Option A: The cap is $3,400, so $2,600 of the contribution has to be refused
It calculates 1%, not 3%.
Option B: The cap is $9,860, since contributions cannot exceed actual costs
It gives the cost constraint, not the requested percentage ceiling.
Option D: The cap is $6,000, which the contribution exactly exhausts by design
An offer does not define the program ceiling.
Exam Tip
Check both the percentage ceiling and eligible costs, using the correct program base.
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