As of February 1, 2010 the Federal Housing Administration (FHA) is waiving their regulations on the “90-day Flipping Rule” they have in place for new FHA borrowers.
To be clear, let’s define everything here.
An FHA loan is a mortgage that is insured (not underwritten) by the FHA for borrowers that meet their qualifications. About 80-90% of people buying houses right now are using FHA as their loan of choice, especially 1st Time Home Buyers in part because there is only the minimum of a 3.5% down payment unlike conventional loans which have 5-20% down payment requirements.
FHA had instituted a rule that stated no loans could be processed on a house that had been sold less than 90 days from the date of the new borrowers Purchase Agreement. This had a big impact on investors who were buying properties and fixing them up, then re-selling them to new owner-occupied buyers. Most of these “flips” were able to be completed within 60 days from when the investor bought them. However with the majority of buyers using FHA mortgages, they could not write a purchase agreement on the property until day 91 from the investor’s previous closing date.
This created a log-jam for investors, who wanted to sell fast and rehab more properties. This also was frustrating for buyers who wanted to write an offer and move in faster to these newly rehabbed homes.
For 1 year FHA has lifted this restriction, so until Jan 31 2011 feel free to write your FHA offers with confidence on these fix-n-flips.
There are still some guidelines for the 90-day rule, so check with your loan officer to make sure your house meets these requirements ahead of time.
I am glad to see that this was waived Steve. Will help move some more inventory here in our market! Thanks!
This FHA rule was really a drag. Glad to see they have removed it.