HUD TAKES A NEW POSITION ON THE 90 DAY FLIP RULE … It’s OK Now!
HUD now 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. Up to this point, only banks had the privilege of selling their recently acquired foreclosures to FHA buyers. Now investors and others who acquire real estate and want to sell within the first 90 days can. The waiver of the 90 flip rule is for one (1) year and takes affect on February 1, 2010. With tight underwriting guidelines, many home buyers are realizing that FHA financing is their only way to afford home ownership. More reasons why I like this change:
§ FHA buyers will have more homes to choose from
§ Investors will be able to attract a larger pool of home buyers
§ Buyer and seller agents will increase their closing ratios
§ Mortgage brokers will have more lending options for their clients
HUD’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
3) HUD may allow a sales price in excess of the 20 percent limit if the lender can document legitimate rehabilitation to the property and/or a second appraisal supporting value. In addition, the lender must order a property inspection and provide the report to the buyer prior to closing.
4) The same property flipped mutiple times ... big red flag and a No No!
KEY INFORMATION: Home buyers should expect some FHA lenders will not follow HUD's waiver and continue to impose the 90 day restriction. When getting pre-approved for financing, I suggest home buyers ask their mortgage advisor if they have lenders who accept HUD's waiver. If they don't, find a different mortgage advisor who does so you can shop till you drop and avoid surprises later.
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