Thomas Martin Staff asked 5 years ago
Are FHA mortgage loan amounts restricted when the purchase involves a Family member?
The maximum loan-to-value (LTV) percentage for family member transactions on principal residences, including transactions where a tenant-landlord relationship or rent to own exists at the time of contract execution, is restricted to 85 percent. An Identity-of-Interest or family transaction is a sale between parties with an existing business relationship or between family members. The 85 percent maximum LTV restriction does not apply for Identity-of-Interest transactions under the following circumstances:
GETTING AN FHA MORTGAGE WHEN BUYING FROM A FAMILY MEMBER
• 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. A lease or other written evidence to verify occupancy is required.
• 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. A lease or other written evidence to verify occupancy is required.
• the principal residence of another family member; or
BUILDER’S EMPLOYEE PURCHASE
• An employee of a builder, who is not a family member, purchases one of the builder’s new houses or models as a principal residence.
CORPORATE TRANSFER
• A corporation transfers an employee to another location, purchases the employee’s house, and sells the house to another employee.
TENANT PURCHASE
• the current tenant purchases the property where the tenant has rented the property for at least six months immediately predating the sales contract. A lease or other written evidence to verify occupancy is required.
For additional information see Handbook 4000.1 II.A.2.b.ii.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
