"Can I Buy a Home With a Shared Equity Investor and Still Use a Conventional Loan?"

The offer came up over dinner. A friend who has done well with her investments said she would put money toward the home you have been looking at, and in return she would own part of it with you. You would live there and make the payments. She would share in what the home is worth when it is sold or when you buy her out. It sounds generous, and it is. Before anybody shakes on it, the agreement has to be built so a conventional loan can close on it.

Yes, a conventional loan can work with an equity-sharing investor. Under Freddie Mac's guide, the plan has to be written down, and you put at least 5% down from your own funds while your investor adds at least another 5%. You both sign the loan as individuals, and no agreement can require a sale or buyout during the first seven years.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. I'll walk you through each of those conditions, what it asks of you and your investor, and how to set the agreement up before you apply.

This article is about an investor who will own part of your home. Help that comes without an ownership share works differently, and each kind has its own article. Those cover a parent co-signing or co-borrowing on your mortgage, documenting a down payment gift from family, and a gift that comes from your parents' business account. They also cover buying from family with a gift of equity, and a nonprofit's matched savings program for your down payment.

How does a shared equity plan work with a conventional loan?

A shared equity plan is an agreement between two owners of the same home. Freddie Mac's guide calls you, the person who will live there, the Owner-Occupant. It calls the person who puts in money and owns part of the home without living in it the owner-investor. You make the home your residence, and your investor holds a share of its value under the terms the two of you write down.

The rules for this are in Freddie Mac's Seller/Servicer Guide, Section 4204.4, Shared equity plans, revised May 7, 2025. Freddie Mac says it "does not approve individual shared equity plans," and that it will consider buying loans that carry one when every requirement in the section is met.

So there is no list of approved agreements you can pick from, and Freddie Mac does not approve yours ahead of time. Your lender reads your written agreement against the section and decides whether the loan meets it. Every other requirement of a Freddie Mac loan still applies on top of these. The section says so in its own list.

These are Freddie Mac's rules. If your lender plans to sell your loan somewhere else, it is a fair question to ask which set of rules they are following for your loan, because the conditions below come from Freddie Mac's.

Your down payment and your investor's down payment

The guide sets a minimum for each of you, and your investor's minimum comes on top of yours.

Your share. You have to make a down payment of at least 5% from your own personal funds. Section 4204.4 points to Freddie Mac's Section 5501.3, which covers your own personal funds. Its table of minimum contributions lists a home with a shared equity plan at 5% of value, which "must be Owner-Occupant's personal funds." Your checking, savings and eligible retirement accounts are the kind of money that section describes.

Gift money is handled in a different place. Freddie Mac describes gifts in Section 5501.4, Other sources of funds, as a source other than your personal funds. So if your parents were planning to help, you'll want to plan on your 5% coming out of your own accounts, and talk with your lender about where any gift could fit around it.

Your investor's share. Your investor has to make an additional down payment of at least 5%. The word "additional" is the guide's, and it means their money comes on top of yours. Between the two of you, that is at least 10% down. Your investor can put in more than 5%, and the guide only sets the minimum.

Your investor's money goes in as a down payment toward ownership of the home. Freddie Mac treats money structured as a second loan very differently. Section 4204.1, Mortgages with secondary financing, says the terms of a second loan "must not permit the provider or any other party to share in the appreciation" of the home. The guide's one exception is a program it calls Affordable Seconds, which is a different kind of financing. An investor who wants a share of the home's growth comes in as an owner, under Section 4204.4, and puts their money in as a down payment.

Both of you sign the loan documents

Section 4204.4 requires the Owner-Occupant and the owner-investor to sign the Note and the Security Instrument. The Note is the promise to repay the loan. The Security Instrument is the mortgage or deed of trust that pledges the home as collateral for it.

That means your investor is taking on the loan with you, as well as owning part of the home. It is a bigger step than writing a check, and your investor should go into it understanding that their name will be on the debt.

Your investor also goes through the file the same way you do. The guide says the lender has to get a mortgage application, financial statements and credit reports for both of you. Your investor will be asked to provide those along with yours, so the lender can review both of you before the loan closes.

Both of you also have to be individuals. Freddie Mac spells out what that leaves out: "corporations, limited partnerships, partnerships or trusts." If your investor usually puts money into real estate through a company or a trust, you'll want to raise that with your lender early. That way the agreement is not drafted around a name that cannot sign.

The seven-year window on a buyout or a sale

Section 4204.4 says no agreement requiring the sale of the property, or the buyout of either owner's interest, may be in effect during the first seven years after the Note Date. The Note Date is the date on the Note you both sign.

The rule protects both sides of the agreement. Your investor cannot hold a clause that forces a sale in year three. You cannot be required to buy your investor out in year five, and your investor cannot be required to sell their share to you during that time either. The guide says "either owner's interest," so it reaches both of you.

If any clause requires a sale or a buyout before seven years have passed from the Note Date, it needs to change before you apply. The guide's wording is about an agreement that requires a sale or buyout. If your agreement has any buyout language at all, please ask your lender to read it against that wording before anyone signs.

After the seventh year, the guide does not set terms. Your written agreement decides how the two of you divide the value, and when one of you can buy the other out.

The seller, the builder and the agents cannot be your investor

Neither the property seller nor "any other interested party to the transaction (such as a builder, a real estate broker or a real estate agent)" can be a party to the shared equity plan.

So if the seller offers to stay in as a part owner to help you buy, a conventional loan under these rules cannot close with the seller holding that share. The same goes for the builder of a new home and for your real estate agent or their broker. Your investor has to be someone outside the purchase itself.

How to set up a shared equity agreement before you apply

Setting things up in this order lets the agreement and the loan line up the first time.

1. You and your investor put the whole agreement in writing. The guide requires a written agreement, and your lender has to keep a copy in your loan file. A handshake between friends will not meet this.
2. You read every clause about selling or buying out. You'll want to count seven years from the expected Note Date and make sure nothing requires a sale or buyout before then.
3. You both confirm you are signing as individuals. A company or trust cannot be the owner-investor.
4. You plan where your 5% comes from. It has to come from your own personal funds, so it helps to have it in your accounts and documented before you apply.
5. Your investor confirms their share. That is at least another 5%, put in as a down payment.
6. You apply together. Your investor completes an application and provides financial statements, and the lender pulls a credit report for each of you.
7. You sign together at closing. You both sign the Note and the Security Instrument.

If you'd like to see where your scenario stands before you start, getting pre-approved with reviewed documents explains what goes into a letter you can rely on.

Common mistakes that hold up a shared equity purchase

Each of these can be fixed before you apply.

A buyout clause in year three or five. Moving the earliest required buyout or sale past the seven-year mark brings the agreement in line.

Using gift money for your 5%. Your share has to come from your own personal funds, and Freddie Mac handles gifts in a separate section.

Treating the investor's money as a loan that shares in the home's growth. A second loan that shares in the home's appreciation runs into Section 4204.1. Your investor's money belongs in the purchase as their down payment and their ownership share.

Signing through a company or a family trust. Both owners have to be individuals, and the guide names corporations, limited partnerships, partnerships and trusts as the ones that do not qualify.

Bringing in the seller or your agent as the investor. Interested parties to the purchase cannot be part of the plan.

An example with made-up numbers

The numbers below are made up to show the mechanism. They are not a real client, and they are not a quote.

Say you are buying a $400,000 home. You have $20,000 of your own savings set aside, and your investor has agreed to put in $60,000 for a share of the home.

Purchase price                         $400,000

Your down payment (5%)                  $20,000
Investor's down payment (15%)           $60,000
                                       --------
Total down payment                      $80,000

Loan amount                            $320,000

Your $20,000 meets the 5% floor from your own funds. Your investor's $60,000 is well past their 5% minimum. You both sign the Note and the Security Instrument, and the lender has a credit report and financial statements for each of you. Your written agreement gives your investor no right to force a sale, and gives neither of you a required buyout, until seven years after the Note Date. After that, your agreement sets how the two of you split the value.

Your next steps

If you'd like to see the purchase with your own numbers, the rate tool is here, with no credit pull and no account. You can choose a rate option that works best for you, and you can change that selection later. Once you have a draft of the agreement, you're welcome to call me, and we can go through it together against Section 4204.4 before either of you signs.

Nothing here is a loan approval, a denial or a commitment to lend. The requirements above come from the Freddie Mac guide sections cited, and your lender applies them to your own file.

Common questions

Can a shared equity investor help me buy a home with a conventional loan?

Yes. Under Freddie Mac's Seller/Servicer Guide, Section 4204.4, Freddie Mac will consider buying a loan on a home with a shared equity plan when every requirement is met, starting with a written agreement kept in the loan file. You put at least 5% down from your own funds, your investor adds at least another 5%, and you both sign the Note and the Security Instrument as individuals.

How much does each owner have to put down in a shared equity plan?

Under Freddie Mac's Section 4204.4, the owner who will live in the home puts at least 5% down from their own personal funds. The owner-investor makes an additional down payment of at least 5%. Together that is at least 10% down. Freddie Mac's Section 5501.3 lists the occupant's share as 5% of value from the occupant's personal funds.

Does the investor have to sign the mortgage?

Yes. Section 4204.4 requires both the Owner-Occupant and the owner-investor to sign the Note and the Security Instrument. The lender also has to get a mortgage application, financial statements and credit reports for both of them. Both owners have to be individuals, so a corporation, limited partnership, partnership or trust cannot be the investor.

When can I buy out my shared equity investor?

Freddie Mac's Section 4204.4 says no agreement requiring the sale of the property, or the buyout of either owner's interest, may be in effect during the first seven years after the Note Date. After that, the guide does not set terms, and your written agreement decides when and how a buyout happens.

Can the seller or my real estate agent be my equity-sharing investor?

No. Freddie Mac's Section 4204.4 says neither the property seller nor any other interested party to the transaction, such as a builder, a real estate broker or a real estate agent, can be a party to the shared equity plan. Your investor has to be someone outside the purchase.

Does Freddie Mac approve shared equity agreements?

No. Section 4204.4 says Freddie Mac does not approve individual shared equity plans. It will consider buying the loan when every requirement in the section is met, so your lender reviews your written agreement against those requirements.