FHA Takes a New Position on the 90 Day Flip Rule … It’s OK Now!
ByUPDATE: December 15, 2010
Click here for lastest news about FHA’s 90 Day Flip WAIVER expiring January 31, 2011
If you’re not familiar with the 90 flip rule, check out my blog “The 90 Day Flip Rule … Some Lenders Have One While Others Don’t“. It will give you background on the flip rule for all loan programs.
ORIGINAL POST: February 26, 2010
FHA believes the real estate market will benefit by allowing buyers to use FHA financing to purchase a home even when the seller has been on title for less than 90 days. Prior to the waiver, only banks had the privilege of selling their recently acquired foreclosure to a buyer using FHA financing.
The waiver allows investors and others who acquire a home and want to sell within 90 days of being on title, to offer their properties to buyers who will be using FHA financing. The waiver of the 90 rule is “temporary” for one (1) year and takes affect on February 1, 2010. With tight underwriting guidelines, many home buyers realize that FHA financing is their only way to afford home ownership. Reasons why I like this include:
- FHA buyers will have more homes to choose from
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Investors will be able to attract a larger pool of home buyers
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Buyer and seller agents will increase their closing ratios
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Mortgage brokers will have more lending options for their clients
FHA’s updated policy comes with restrictions designed to prevent fraud so investors … pay attention.
1. There can be no relationship or interest between the seller, buyer or other parties to the transaction
2. Seller’s profit is limited to 20 percent above their acquisition cost with exceptions
3. FHA may allow a sales price in excess of the 20 percent limit if the lender can document legitimate rehabilitation to the property and a second appraisal supports value.
4. FHA requires the lender to order a home inspection, provide the report to the buyer prior to closing and include the report in the underwriting of the loan.
5. The same property flipped several times … big red flag and a NO NO!
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