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FHA Tip on Seasoning Issues - Don't Delay Closings

FHA Seasoning

With the increase in FHA production in the last few months, there has been a lot of confusion on seasoning issues.

With the market being a great investment for investors wishing to buy and sell houses, theres a major factor that gets overlooked many times.

Please arm yourself with knowledge so you won't delay a closing or lose out on a lot of money.

Financing through a FHA deal the seller must own the property (be the owner of record) for at least 90 days before he can sell the property. (He can go to contract on day 91 of ownership, not before.)

Please keep this in mind if you are a potential buyer or seller wishing to utilize FHA financing. FHA loans have been a great tool in Homeownership and it can be very easy to miss this important factor in haste of transactions.

Realtor's make it a habit to ask the seller how long they have been on title which could save you delaying loan closings.

There has been an overwhelming response with investors lately not knowing about this guideline and I hope this quick tip helps makes future transactions more smoothe.

As they say "Knowledge is Power"

*************UPDATE************* 06-16-2008 Hud News *************UPDATE*************

"FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES
Measure seen to bring stability to home values and accelerate sale of vacant properties"

"In an effort to stabilize declining home values in certain neighborhoods, the Bush Administration today announced on Friday a temporary policy that will extend government-backed mortgage insurance and allow for the immediate sale of vacant foreclosed properties. "

Looks like this temporary policy change will remove the 90 day rule only for foreclosed homes. This policy change is only temporary and will remain in affect until the admin decides to change it in the future.

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Just-In-Time's Loans - Mortgage Needs and Advice on Time. (757-228-3668)

Posted by Justin Williams - Loan Officer on 05/28/2008 08:16 PM

Comments (34)

fha, mortgage, purchase, guideline, investment, tips, policy

This post has been included in Virginia Information Virginia Beach City County, VA Information Virginia Beach, VA Information
Post is included in group: Mortgages
Post is included in group: Real Estate Professionals
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Post is included in group: The FHA Mortgage Group
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34 Comments on FHA Tip on Seasoning Issues - Don't Delay Closings

MAY

2008

Hey thats good info. Why would they have that 90 day requirement?

Pete - It's FHA regulation in providing insurance to the borrowers. FHA's policy is not to encourage predatory/flipping properties which is why the strict 90 day rule.

Justin - Great tip. I've known about this but we really should get in the habit of asking sellers how long they have been on title.

MAY

2008

Speaking of seasoning, nice thing about FHA is you don't have to season money in a bank account 60days since Reserves are not required and you can use gift funds.

Great information, Justin.

great tips again just - in time advice. :) by the way ....i like the new pic!

Hey Justin,

What about properties that are part of an estate via death of the owner and it is part of a family trust?

Justin - nice new mug! I learned a few weeks ago about the 91 days for contract ratification, not 90 days. We had to re-write the contract at the last minute.

Tina in Virginia

Thank you, Justin! That's is a great tip to remind everyone of. Here is a question that I have had opposing answers on...What about bank owned properties??? With all the foreclosures, does the bank also need to be owner of record for a min. 90 days? (I just don't want to have to call FHA Connection and sit on hold for 1/2 hour!)

Bo - Habit is key, thanks for commenting !

Marc - Another great reason why FHA is king nowadawys :)

Richard - Thanks for stopping by!

Naoma - hehe thanks, glad you like it!

Rich - Great Question!! A Seller that inherits the property does NOT have to wait the 90 day mark :) Just recently had one ^_^

Tina - Thank you very much! Yes a lot of co-workers have went through the same obstacle so I had to write about this post!

Sherri - Hi Sherri, glad to see a new face to my blogs. Hopefully I can catch you before you had to call FHA connection ;)

Well here it is because I had one come up last month, great question!

Bank Owned Properties are ok to sell before 90 days

Mortgage Owned Properties are restricted to the 90 days

Mortgage Company owned by a Bank (i.e WellsFargo) are ok to sell

The rule written for the FHA guideline is VERY VAGUE regarding this transaction and 90% of the time relies heavily on the lender. But the overall consensus is the above.

Hope this helps!!

Great Questions so far!!! Keep em coming!

FOLLOWUP - A list of more exempted Sales provided by §203.37a: http://portal.hud.gov/fha/reference/ml2006/06-14ml.doc

· Sales by HUD of its Real Estate Owned

· Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.

· Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.

· Sales of properties that are acquired by the sellers by inheritance.

· Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.

· Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.

· Sales of properties by local and state government agencies.

AUG

2008

I am a bit confused about seasoning. If I have no morgage and wish to sell my properties in less than 90 days is seasoning still a issue? I know FHA has 91 day seasoning for morgaged properties but what about properties in which the seller paid cash for? Does the fact I paid cash affect the seasoning issue? I have also read that in recent weeks a new and perhaps temporary law has been passed exempting "certain neighborhoods" from seasoning all together. It seems there is not a well defined answer to this issue

Thanks

Mike

AUG

2008

Justin - I thought that the waiver of the 90-day rule is only for bank or lender-owned properties? In other words, if a RE investor owns it, he or she still has to wait the 90 days?

Why would 90 days be the deal breaker and 89 days. I guess you have to have some numbers to put in there.

@ Mike - Seasoning is based upon how long have you had ownership for the house regardless if you have a mortgage or not. You are right about a general vague rules they put forth and again its mainly relied upn the lender to make final decisions.

@ Jackie - The waiver applies to Foreclosed properties only.

@ Denise - well actually you can't even write a contract until the 91st day if the owner owned it less than 90 days.

AUG

2008

Justin... glad that you came back to add the update, in regards to foreclosures. So many people heard the new update, but didn't know that it just applied to foreclosures. And so many people are asking why they even have a 90 day waiting period. There are several reasons. one is that they are trying to keep fraud down of flipping property between investors. It becomes a combination of what I just mentioned and several other things. nice job....

jeff belonger

@ Jeff - Thanks for commenting, I completely agree that there are still many questions out there why these guidelines are in place in the first place but the reasoning behind this is to prevent fraud.

AUG

2008

Great post

AUG

2008

The rule may tend to scare away the actual scam artists, however, with the stricter guidelines on valuation, new automated valuation models, reviews, and second appraisals, there should be no care as to time on title. Bottom line is : Is the property truly worth what it is being purchased for? (Is the LTV position true). We still live in America, where profit should not be a dirty word.

AUG

2008

Justin,

As usual, you are a wealth if accurate information. That's for the update and clarification!

Tina in Virginia

AUG

2008

@ Richard - thanks!

@ John - Good insight, who knows maybe the 90 day rule will be removed completely ,we will see.

@ Tina - Thanks for commenting and thanks for the compliment :)

SEP

2008

If I buy a foreclosure property at the trustee sale for cash does this property have to be held for 90 days for fha financing since it was a foreclosure property

SEP

2008

@ Steve regarding Question - nope the new rule applies to foreclosed homes so your 90 day will be waived, see above for updated article.

DEC

Hello Justin, I'm in a bit of a pickle maybe you can help ... I have a signed contract from the seller to purchase a property however the either my realtor goofed up or the sellers agent didn't read the contact carefully. Here is the deal, after getting a signed accepted offer back from the seller we realized that the owner of the property has not held the property for atleast 90 days. Due to this I can't get FHA financing until the owner has had the property in possession for 90 days. Because I have a signed contract to purchase the home under certain terms inculding an FHA backed loan does the seller have to honor the deal and allow me more time to get my FHA funding in place ? Meaning do they have to hold the property for the remaing x amount of days until FHA will fund my loan ?

@lane - Hello there. The seller's best interest is to get a new addendum to extend the financing otherwise you can walk away from the deal simply by stating this purchase doesn't qualify for FHA financing due to the 90 day rule. I would ask the seller to get the addendum if he refuses then you can ask your lender for the denial letter due to the 90 day rule and show that to the seller to walk away from the contract. The other option would be to get a conventional or va financing which requires no seasoning and get a new addendum for that.

MAR

Hi Justin!

I have a contract on a home which I am the owner/listing agent. Purchased in January, worked our butts off and hired contractors for the rest and relisted the home in Feb. Received a contract for a 4/1 closing ( FHA of course) which we now know can't happen because of the 91 day rule. My question is can any of the paperwork (contract, appraisal (x2) deed search etc) be done now or does the entire process starting with the contract have to occur after the 91st day?

@Jean

Hi Jean. you can definitely get stating on the processing of the paperwork right now and the only stipulation is that it must FUND on the 91st day..so all and all you should be fine just can't close till then.

MAR

Hi Justin,

I'm going to give you a call because as it turns out the buyer of the property is getting her mortgage from your company and the loan rep said we can not sign a contract until the 91st day?

@Jean

Sure, feel free to call. To answer your concern, its really up to all the parties involved, Yes you can start all the paperwork (I have before) KNOWING that you can not fund until the 91st day but can not sign the contract until the 91st day. So what that means is get all the clients Income & assets together. Get all required signatures & payoffs, have everything pre-ready so when its time on the 91st day, you will be ready.

Thanks Justin,

I think that answers my questions. The mortgage rep ( from Prosperity ) has already met with the buyer and has all the documents she needs from her so i guess we will sign the contract on day 91 and go from there.

Given the current market this rule seems a bit out of date.

I went in to a foreclosed home with my $$$$ fixed it up with my $$$$ and am selling it below anything else of its kind yet I have to wait 91 days - do they really want to stimulate the housing market? Makes ya wonder.......

MAY

But what if the fha case number has already been assigned before the 90 days. Can you still go back and redate the contract and everything be fine for the 91st day to close?

JUL

Okay so I just put a contract on a home . The owner has had the house since Feb 09 but I was told he could not get title insurance yet . He purchased the home from the court house and bought the tax liens . So does this mean its 91 days or not ??? He is on the county tax rolls since Feb .I am going FHA . Help !

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FHA Tip on Seasoning Issues - Don't Delay Closings

"FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES Measure seen to bring stability to home values and accelerate sale of vacant properties"

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"FHA EXTENDS FINANCING FOR IMMEDIATE PURCHASE OF FORECLOSED HOMES
Measure seen to bring stability to home values and accelerate sale of vacant properties"