90 Day Flip Rule - FHA & Conventional Loans
In today's real estate market we see many purchases that are properties which were recently foreclosed on and now being sold by the bank. This has been a reality of a market that has at times and in certain areas seen more bank owned properties as conventional home sales. As a result of the decline in prices we have also seen an increase in properties being bought by investors, often on a cash basis, cleaned up and then put back on the market for resale, very quickly. For these particular cases, what you may have heard as, as the 90 day flip rule, comes into play.
The Federal Housing Administration has for many years had a 90 day flip rule in place, to prevent the buy and quick resale of a home within 90 days. This past year, this rule was lifted and allowed for ownership change and immediate resale of a property in the case of a property being foreclosed on and resold by a bank. So although you may have heard that the 90 day flip rule had been lifted on FHA loans, it really does not affect any homes, except for those being foreclosed and resold by the bank.
On the other hand, you have conventional Fannie Mae and Freddie Mac backed loans. And although no 90 day rule exists for conventional loans, most, if not all lenders will have restrictions on properties that have been bought and sold within 90 days. In general, lenders will allow for the immediate purchase and resale of all foreclosure homes being resold by banks, just as in FHA. However, in the case of an investor acquiring a property and then trying to resale the property within 90 days for a price higher then it was purchased for (which is often the case in a "flip" transaction), this will not be allowed, as it will be considered a flip transaction.
What this basically means for purchasers of new homes at the end of the day, is that if the home has recently changed ownership, it is important to know why and how. If the property was foreclosed on and being sold by the bank you are fine. However, if the property was bought by a third party investor and resold right away, for a higher price, then you may not be able to obtain conventional or FHA financing on the home.
For more information on home purchase loan or refinance programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: email@example.com or online at www.strategicmtgaz.com