Identity of Interest Transactions When Getting An FHA Loan

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Thinking about buying a home from someone you are related to or do business with? FHA will allow FHA financing on the property, but under certain circumstances and with some modifications to typical FHA rules.

Generally speaking, if you are buying a home from someone you do business with or are related to, FHA will allow a maximum loan-to-value of 85% unless the circumstance is one of the following:

  • Someone who works for a home builder is purchasing one of the builders new homes to be their primary residence
  • Someone who has been renting the property they want to buy for at least 6 months predating the sales contract
  • A company transfers an employee to another city, buys that employee’s home and then sells it to another employee
  • A family member has rented the property for at least six months immediately predating the sales contract

Identity of interest transactions are typically something that underwriters will look for in the normal course of underwriting a file – and if the property has been a buy-and-flip property, it may come under more scrutiny.   And in the worst case – if you are at risk of being identified as a party to a transaction with identity of interest concerns and want to get FHA financing, be prepared to put more money down.

Identity of interest: it isn’t anything a bigger down payment can’t fix.

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