FHA flips and what you need to know
Click here to see the original waiver.
This means that buyers may use FHA financing to purchase a home that was previously purchased by the seller within the past 90 days. Before this waiver an FHA purchaser was required to wait until the seller had owned the property for at least 90 days.
Summary of the waiver:
All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. The lender is looking for the following:
Seller holds title to the property
LLC’s, corporations or trusts that are serving as sellers were established in accordance to the law
NO pattern of previous flipping as evidenced by multiple title transfer in the last 12 months (this is a big one to look out for)
Property was marketed open and fair
In cases where the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender follows these criteria:
Justify the increase with supporting documentation and/or a second appraisal (2nd appraisal cannot be paid for by the borrower)
A property inspection must be ordered by the lender and the inspector can’t have an interest in the property or relationship with the seller. The cost can be passed onto the borrower at closing.
The property inspection will be reviewed by the Mortgage Underwriter and repairs may be requested. (Underwriter is primarily looking for health and safety issues)
Please note that if the sales price of the property is less than 20% above the seller’s acquisition cost the above does not apply.
If you need help or would like a Free mortgage Pre-Qualification please click here
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