There was a time not that long ago that lots of people was getting involved with real estate transactions using various no money down mortgages. People would buy a home in need of repair, take ownership and then try to sell it quickly to a home renovator and make a quick buck. This practice led to some undesirable transactions and caused several default loans. FHA decided that they would stop approving loans for any home that had changed owners within the past 90 days. But now there is a waiver for this rule.
With the sudden rise in foreclosures many neighborhoods are watching bank owned properties deteriorate before their very eyes. The idea behind the FHA waiver is to give honest, hardworking investors a chance to buy a home in need of repair and try to renovate it in order to resell it to a new buyer. There are few caveats to the rule.
- The waiver is in effect until December 31, 2011.
- This must be the first time the home has been purchased by an investor.
- The original purchase by the investor and subsequent sell to the new owner must be arm’s length transactions.
- The home has to be marketed for sale to all buyers.
- If the new sales price increase more than 20% above the purchase price than the investor must provide documentation of the renovations that lead to the increase.
While this is not a perfect solution to the mortgage loan problems that have hit the country as a whole it is a way to allow experienced investors improve a community and provide affordable housing to a number of individuals. So far, the waiver has allowed transactions of over 21,000 homes across the country. FHA is keeping an eye on the transactions to make sure everything is within the law.
If you would like additional FHA information visit our FHA Loans page or if you would like to see if you pre-qualify, please contact us or apply online.
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