Our son recently purchased his first home – and it was a home someone purchased, fixed and decided to Flip. Being in his 20’s, he had no time or knowledge to fix the issues with the house by himself, and the “fixed up Flip was PERFECT for him! Traditionally, FHA made a home buyer wait at least 9o days after a property changed hands before it was eligible for a new FHA loan.
Last week, FHA realized that this type of property is still one of the important choices available to home buyers - and extended a rule that made it much easier to purchase a “flipped” property and take advantage of the FHA program. Makes sense… think of it this way – a home goes into Foreclosure, the bank takes the home… and with the “traditional” FHA Flip Rule, no one could buy the home for ANOTHER 90 days!
FHA Loans for Flipped Houses Now Easier: New Guidelines on “flipped” houses means no more waiting 90 days to get a FHA loan on a house an Investor Fixed Up
The “waiver” (that went into effect in February of 2010) was due to expire at the end of the month, and has been extended until 2014; our family thinks this is a good thing for Real Estate and First Time Homebuyers. There are some “Catches” to this waiver that are important to recognize:
- All sales transactions must be at “arm’s length,” meaning that buyers, sellers and other involved parties cannot be related, involved in business, other involved in any relationship that would compromise the fairness of the sales transaction.
- If the selling price of a property exceeds 20% of its former purchase price, the seller must provide documentation which justifies such a dramatic increase in price. Meaning – the Seller obtains a foreclosure for $70,000 and 60 days later sells the house for $120,000 they must document what they did to justify the higher value – new roof, appliances, etc.
- The waiver of the 90-day rule only applies to forward mortgages, so it excludes programs like the reverse mortgages such as the Home Equity Conversion Mortgage (HECM) purchase program.
Research by FHA and the Administration shows that property transactions move much more quickly now than they did even 4 years ago. The process of acquiring, refurbishing, and reselling a house can frequently be completed within less than 90 days.
If you are interested in buying a home in North Carolina and want to know more about qualifying for a home using FHA financing, call Steve and Eleanor Thorne 919 649 5058 – we understand the FHA Underwriting guidelines, the process, and how you can buy a home with 600 middle credit scores! We also have some of Today’s Best Mortgage Rates in NC!
If you are a parent, searching for ways to help child buy a home – or want to know about special FHA home buying programs for Single Parents – we’d be glad to provide more information for you too