The maximum loan-to-value (LTV) percentage for Identity-of-Interest transactions on principal residences, including transactions where a tenant-landlord relationship exists at the time of contract execution, is restricted to 85 percent. An Identity-of-Interest transaction is a sale between parties with an existing business relationship or between family members as defined in Handbook 4000.1 II.A.2.b.ii.(A). The 85 percent maximum LTV restriction does not apply for Identity-of-Interest transactions under the following circumstances:
FAMILY MEMBER TRANSACTIONS
• the principal residence of another family member; or
• 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.
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