FHA 90 DAY FLIPPING RULE WAIVER

FHA 90 DAY FLIPPING RULE WAIVER: Effective February 1st for all home loan purchases where an investorhas purchased a property aand intends to flip it and sell to a home buyer within a 90 day of investor purchase. HUD thought it would be a grand idea to allow for this to open up the market in hopes of gaining momentum for home purchases and sales for all! Well, as usual with HUD waiver, there are always some requirements and here they are: 1) If the percentage of profit to the seller is 20% or more of the original acquisition cost, the lender will require a 2nd appraisal (cost to the buyer) and or require supporting paperwork for the increase in value. AND the underwriter will want to review the home inspection report. Now generally most buyers would already have paid for this directly to the home inspection company and the lender would never review. So be careful here... The lender/underwriter at their discretion can call for any health and safety issues which may show on this home inspection report. In the past lenders never saw this report and if your purchase is not involved in a flip transaction, no worries, none is called for . I have had a few of these FHA flip purchase transactions, always ordered the 2nd appraisal, one came in lower than the 1st. In this case, the lender will now use the lower value. HOWEVER, the appraiser is open to receiving additional supporting comps and if justified can make adjustments to appraised value. The bottom line is: These are not for the faint of heart. These loans are good for the buyer, can be tough on the seller (due to 2nd appraisal, document work on property and home inspection review). In any event, the reason for HUD to allow this waiver is, again, to increase home sales for home buyers and sales for sellers which ultimately opens up opportunity for Realtors to sell and list, lenders to perform on home loans title companies to have open title account, home inspectors to inspect, appraisers to appraise and on and on. So this is good right? yes, I do believe it is. HUD wants to make sure home buyers are not being taken advantage of with these flip properties and this is there way of doing so. I am happy to say the FHA loan is a good loan product and the waiver of the 90 day flipping rule does indeed help the market movement. Just be careful with the 2nd appraisal and home inspection. Don't be blind sided if that home inspection has listed some health and safety issue and the underwriter/lender calls for this item to be repaired. As a final comment, please note that each lender may or may not have decided to follow along with the waiver policy, so before you go into contract and pick a lender, make sure the lender you choose will allow the flip.