Monday, May 5, 2008

FHA May not allow max financing on your deal?

FHA defines TRANSACTIONS THAT AFFECT MAXIMUM MORTGAGE CALCULATIONS. Certain types of loan transactions affect the amount of financing available and the calculation of the maximum mortgage. I would like to review these this different scenerio this week. Let's first talk about "Identity-of Interest Transactions"

" Identity-of-Interest Transactions. Identity-of-interest transactions on principal residences are restricted to a maximum LTV ratio of 85 percent. Identity-of-interest is defined as a sales transaction between parties with family relationships or business relationships. However, maximum financing above 85 percent LTV is permissible under the following circumstances:

1. A family member purchases another family member's home as a principal residence.
If a property is sold from one family member to another and is the seller's investment property, the maximum mortgage is the lesser of either:
a. 85 percent of the appraised value, or
b. The appropriate LTV ratio percentage applied to the sales price, plus or minus required adjustments. The 85 percent limit may be waived if the family member has been a tenant in the property for at least six monthimmediately predating the sales contract. A lease or other written evidence must be submitted to verify occupancy.

2. An employee of a builder purchases one of the builder's new homes or models as a principal residence.

3. A current tenant purchases the property that he or she has rented for at least six months immediately predating the sales contract. (A lease or other written evidence must be submitted to verify occupancy.)

4. A corporation transfers an employee to another location, purchases that employee’s home, and then sells the home to another employee." This is per the 4155.1