There are exceptions, and you should definitely know what these exceptions are going into your home loan application.įor example, the 85% LTV is waived for transactions where the borrower is purchasing “the Principal Residence of another Family Member…or a Property owned by another Family Member in which the Borrower has been a tenant for at least six months immediately predating the sales contract.

The maximum LTV percentage for a transaction where a tenant-landlord relationship exists at the time of contract execution is restricted to 85 percent.” “The maximum LTV percentage for Identity-of-Interest transactions on Principal Residences is restricted to 85 percent. Such transactions are not forbidden by FHA loan rules, but do require a higher down payment under the right circumstances. The word “interest” in this case refers to the interest the seller has in selling the home to the buyer based on a tenant/landlord relationship, business relationship, or similar associations. The FHA loan handbook, HUD 4000.1, describes identity of interest transactions as a real estate sale between two parties “with an existing Business Relationship” or between family members. What is the meaning of “identity of interest?” That is not the only issue addressed under the rules for identity of interest–those with family ties buying or selling to one another may also need to have an understanding of the rules in this area. What does it mean to have an “identity of interest” when applying for an FHA home loan? This can be an issue if the borrower has been renting the property to be purchased with an FHA mortgage from the seller prior to the home loan application. FHA Mortgage Loan Issues: “Identity Of Interest”

Fha arms length transaction guidelines