HUD just announced that home buyers in California can now apply for FHA home loans to purchase investor flip properties that have been owned for less than 90 days by the seller. This is great news for all of us in Riverside and San Bernardino County where investors are buying foreclosed homes at auction, rehabbing them, and selling them back to first time home buyers. This is very common in cities such as Temecula, Murrieta, Menifee, Corona, Riverside, Moreno Valley, Ontario, Chino, Fontana, Redlands, and Rancho Cucamonga.
FHA Loan to purchase a flip
— BREAKING NEWS — 12/23/2011 — HUD/FHA just extended the FHA 90 day flip waiver through December 31, 2012. Buyers & Investors rejoice! Check out the updated info here: FHA/HUD 90 Day Flip Waiver Guideline Extended in 2012
This policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said. This policy will take effect February 1, 2010, and last for one year.
This is the one of the biggest changes HUD/FHA has made to enable home ownership, especially for first time buyers, since offering FHA loans with only 1/2% Down Payment (99.5% LTV FHA loans).
Until now, people using an FHA loan to finance the purchase of a home could not make an offer on a home that has been owned for less than 90 days by the seller. They had to wait until the 91st day to make an offer.
The only way to finance a home purchase with-in the 90 day period were limited to using Conventional, VA, or private financing. This policy change will bring more competition (more offers) to homes being resold by investors/flippers and allow more buyers using FHA loans to get an offer accepted.
Here are the conditions to this new policy:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions (like two appraisals). If the sellers mark-up is less than 20%, don’t be surprised if the lender still requires two appraisals to satisfy their investors overlay guidelines.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
For more details, read HUD’s 90 day flip waiver requirements.
After having funded seven of these FHA loan ‘flip’ transactions, great care is required by your loan officer to make sure all bases are covered. This is no time to be be leaving your loan approval in the hands of someone who has not funded this type of loan. The most important aspect of making this transaction successful is letting your loan officer know that it’s an FHA flip transaction early on in the process because many lenders still do not fund these types of loans. If you would like to discuss what you need to look out for or just check to see what the rate and fees are for this type of transaction, please call me at (951) 215-6119.
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