Because FHA is rapidly becoming the "IN" loan, I am getting phone calls because some lenders didn’t know about the flipping guidelines until the last minute. Below you will find the guidelines on flipped properties when pertaining to a buyer that is using FHA to purchase the property.
Remember, “Flipped Properties” are defined as those properties that have been acquired within a twelve (12) month period.
If sold in a 0-90 day period after acquisition:
According to FHA guidelines, a property of re-sale occurring 90 days or less from the date the seller acquired the property is not eligible for FHA insurance.
If sold in a 91-180 day period after acquisition:
A property re-sale occurring between 91-180 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
A second FHA appraisal is required from another approved FHA appraiser. The cost of the second appraisal CANNOT be charged to the homebuyer. If the seller is paying for the second appraisal, the real estate contract should reflect the seller is paying for the second appraisal.
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If both appraisals supported the increased valuation of the property, the conditional commitment will be issued based on the lowest value of the two appraisals.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
If sold in a 181-360 day period after acquisition:
A property re-sale occurring between 181-360 days from the date the seller acquired the property is subject to additional documentation ONLY if the re-sale price is 100% or more over the purchase/acquisition price (example: the house was sold to the investor for $50,000 and they are selling it for $100,000)
If there is an increase in value and it is the result of rehabilitation, the lender must require documentation to support the increase is directly linked to rehabilitation of the property.
If the increased value is NOT supported, the previous sales price is to be used in performing the maximum mortgage calculation.
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