Freddie Mac clearly states that the borrower must be the owner of the policy and not just a beneficiary of it. This means that if you’re planning to use life insurance as part of your down payment or reserves, you’ll need to make sure that you’re the owner of the policy.
On the other hand, Fannie Mae does not directly address this issue in their guidelines. This means that it’s not clear whether or not you need to be the owner of the policy to use it for a down payment or reserves.
Both agencies require proof of liquidation when using life insurance toward a down payment and closing costs. However, neither agency requires proof of liquidation when using life insurance towards reserve requirements.
It’s important to note that using life insurance for a down payment or reserves can be a complex process, and it’s always a good idea to consult with a mortgage professional before making any decisions. They can help you navigate the guidelines and ensure that you’re following all the necessary steps.
In conclusion, while Fannie Mae and Freddie Mac have slightly different guidelines when it comes to the use of life insurance for down payment or reserves, both agencies require proof of liquidation when using it towards the down payment and closing costs. It’s always a good idea to consult with a mortgage professional before making any decisions.
Since MortgageDepot is both a Fannie Mae and Freddie Mac mortgage broker, we have the luxury of structuring loans that fit our borrowers scenarios.
Connect with one of our loan consultants to learn more.
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