Lender credits
A lender credit can reduce cash due at closing, but it is not a substitute for the borrower's down payment.
Freddie
Freddie permits lender credits derived from premium pricing or funded directly by the lender. They may be used toward borrower closing costs and cannot require repayment.
Excess credit
Under Freddie's current rule, lender credit above actual closing costs must generally be reduced or the excess applied as a principal curtailment and reflected on the closing disclosure.
Fannie
Fannie also permits lender contributions toward borrower-paid closing costs and prepaid fees under its applicable lender-contribution and premium-pricing rules.
Official guide baseline
Fannie Mae Selling Guide · Freddie Mac Seller/Servicer Guide
Program terms, AUS findings and lender overlays control. DPA program eligibility must also be verified with the program administrator.