Why is my lender only allowing 3% in closing costs when the total HomePath incentive is  3.5%?  Fannie Mae is offering 3.5% in closing costs assistance through June 30, 2011.  HomePath and FHA lenders typically allow up to 6% towards closing costs on owner occupied homes.   However, non HomePath or non FHA lenders may impose their own restriction on the use of the 3.5% incentive.   A lender may consider the incentive a "seller contribution" and limit the amount to 3%.   If  the lender only allows 3% or a buyer's total closing costs are lower than 3.5%,  the difference will not be available as a credit to the buyer at closing.  This is true regardless of the percentage or dollar amount written in the contract.  Therefore, it's important to check with your lender and be familiar with the guidelines for your loan prior to writing an offer .

To be eligible for the HomePath incentive, the buyer must meet the following qualifications:

• Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer in order to be eligible.
• The initial offer must be submitted on or after April 11, 2011 and close by June 30, 2011. If an initial offer was made prior to the effective date, the offer is not eligible for the incentive.
• The sale must close on or before June 30, 2011. No exceptions will be made to this deadline.
• Only buyers purchasing a HomePath property as their primary residence may receive up to 3.5% in closing cost assistance. Second homes and investment properties are excluded from the incentive.
• Buyer must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.

Fannie Mae's goals in offering this promotion are to reduce inventory of vacant homes and attract qualify owner occupant buyers to the market.    The eligibility criteria to receive it and the guidelines for your particular loan are two different matters.   Whether your lender allows the use of the full 3.5% incentive is solely up to them.