January 11, 2012
Recently we posted about FHA loan limits and something called “identity of interest” transactions, which the FHA official site describes as “a sale between parties with family or business relationships.”
For example, if a business partner wanted to sell property to a fellow partner, that could constitute an “identity of interest” transaction. The same would be true of family members selling to other family members.
According to FHA loan rules, the “maximum loan-to-value (LTV) factor for identity-of-interest transactions on principal residences is restricted to 85%.” That means the borrower would be approved for the FHA home loan, but only for 85% of the value of the property.
Fortunately for many borrowers, the FHA has exceptions to this 85% rule. “Financing above the 85% maximum for identity-of-interest transactions is permitted under certain circumstances,” such as when one family member purchases another family member
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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