For all FHA mortgages, HUD recently revised its Family Member definition for Identity of Interest. The definition of a family member, for purposes of Identity of Interest transactions has been expanded to include:
· Brother, stepbrother
· Sister, stepsister
These changes are in addition to the previous definitions including:
· Child, parent or grandparent
· Legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption
· Foster child
An identity of interest transaction is a sale between parties with family or business relationships. Financing above the 85% maximum LTV for identity-of-interest transactions is permitted under certain circumstances.
Family Member Purchase
The 85% LTV limit may be waived if the family member has been a tenant in the property for at least six months immediately predating the sales contract. A lease or other written evidence must be submitted to verify occupancy.
A current tenant, including a family member tenant, purchases the property where he/she has rented for at least six months immediately predating the sales contract. A lease or other written evidence to verify occupancy is required. The maximum financing calculation is not impacted in a sales transaction between a tenant and seller with no identity of interest.