I thought I'd just try to address some issues here and try to keep it light. I just read a post comparing flipping and rehabs, and I just took a mortgage application for a property which is a flip. The buyer does want a convential loan. Should be easy right?
Not necessarily.
I wasn't told intially that it was a flip, but I pulled the tax records and the deed, and got some follow up info from the bus driver.
Fannie & Freddie don't have any restrictions per say, in regards to flipping, but look out for the lender overlays, both stated and hidden in their subconscious.
Hidden in their subconscious?
Ya, that's where when the appraisal comes in and the underwriter sees the investors profit, thinks it's too much, and feels uncomfortable approving the loan. You get a reason for the turndown that makes you shake your head and go, huh?
I polled several investors to see what I would get for overlays/restrictions.
First response, and this was from a "major" national lender/investor.
12 months seasoning
Really, that's what they want. They're out.
Next investor, 3 months seasoning, with a list of documented improvements and costs. I asked what happened if there were no improvements. The response
No Loan
Lenders with "no restrictions," for seasoning that is, wanted field reviews, automated appraisals, and 2 appraisals, and/or some combination of all.
I settled with;
As long as it's a good quality appraisal with satisfactory comperables, it will be acceptable and there will be no other restrictions. We'll be holding our breathe here.
As it is a second home they did require a 780 score, unless you wanted to pay a premium for the loan.
The meassage here is;
Just because the buyer wants a conventional loan doesn't mean that there won't be some hoops to jump through.
FHA
I don't want to get to deeply into FHA, remember I was going to try to keep it light, but they've got their own way of seeing things, and then the lenders/investors have their own way of seeing/interpreting what they think FHA is seeing and feeling.
The big difference is up to 90 days of seasoning, and over 90 days-they're different worlds.
I think I'll leave that at that.
So, the point is that lenders have their own way of looking at properties which are being flipped. It's not prohibited, but make sure that you can adapt and see it
through the eyes of the lender.
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