Identity of Interest

[matthew34]

What is the name of your state (only U.S. law)? Illinois

I'm buying a condo with an FHA loan putting down 3.5% The building wasn't quite FHA ready when I wanted to buy, (not enough units sold) so I rented for a month before closing. The day before scheduled closing my mortgage broker said the underwriter won't approve unless I put down 15% because this now needs to be considered an Identity of Interest transaction. Is this correct and if so, did the real estate agent and the developer have a responsibility to make me aware of this? All parties, including the mortgage company knew of my intent to move in prior to closing but no one mentioned this to me. I can't come up with 15% and fear I may default my down payment.

 

[HUD-1]

I have never heard of a lender applying IOI rules to the situation you described. I would ask the lender to contact the HUD Homeownership Center for guidance on this issue.

A. 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 months
October 2003 1-12
immediately 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.