Changes in FHA Mortgages to Impact Property Flips

FHA Mortgages and Property Flips

The guidelines for FHA home loans and property flips has recently changed.  The date HUD uses is the Settlement Date on the seller’s HUD-1. Starting in January, to avoid the 90 day rule, a buyer has to apply for the loan on the 91st day from the HUD-1 Settlement Date. Please note that conventional loans have no such restrictions.

Property Flips Resold within 90 days are No Longer Eligible

Today, FHA Office announced that the temporary waiver of FHA’s regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition, expires on December 31, 2014. This affects how FHA home loans and property flips.

The waiver applies to all sales contracts FULLY executed

FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located. Mortgages that are made on properties in which sales contracts have been executed after 11:59 PM, December 31, 2014, are not eligible for a waiver of the regulation prohibiting property flipping. FHA will not extend the waiver beyond December 31, 2014.

FHA lists the sales transactions exempt from this rule

Exempt transactions include:

  • HUD REO,
  • Sales by other federal agencies of REO properties,
  • Sales of properties by nonprofit organizations (approved to purchase and resell HUD REO properties),
  • Sales by state- and federally-chartered financial institutions and government sponsored enterprises (GSEs), and,
  • Upon announcement by HUD through issuance of a notice, sales of properties in areas designated by the President as federal disaster areas.

Email me if you have any questions or would like to discuss your options about FHA financing. Additionally, HUD provides a more detailed FAQ about FHA mortgage regulation and property flipping.

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