The new electronic FHA 4155 has just been released that will now assist finding updated underwriting guidelines for all. A question that continually comes up every week for us is property flipping, especially since investors have been buying and renovating properties. FHA lending in my immediate market is constituting 70 - 80% of the purchase business right now. As a listing agent this is incredibly important to understand the guidelines and make sure you can execute a purchase contract with your seller while setting the right expectation. In regards to Property Flipping (scroll down to section e.)the first guideline to comply with is the 0-90 day rule. If you submit a contract within the first 90 days after the acquisition - no FHA loan will be able to proceed. Yes there are exceptions(section h) such as HUD properties and estate sales, but you will find that these most likely will not be ones that the general resale market would be able to utilize. Please rememberYour purchase contract must be dated 91 days or later.
In addition to the 90 day rule you will also find that there are additional guidelines for properties purchased between 91 and 180 days and 91 days and 12 months. The reason I bring these additional guidelines up is that for some home buyers a second appraisal may be required and this will affect closing costs. FHA appraisals are approaching $400 in this market and if the loan requires 2 appraisals you are now approaching the $800 range. There is relief though in that the second appraisal may not be charged to the borrower. Hint -you may want to make sure what your lenders policy is up front
Lastly you will find that the guidelines allow for underwriter discretion and today most lenders are going to take a cautious approach which most of the time may require the second appraisal. So to sum up some of this - the recommended approach might be - is that first the listing agent needs to know when the property was acquired - seems simple enough. Second need to make sure the buyers agent and lender are aware of the original acquisition date so they will know how to proceed. Please don't wait until the lender gets the title report only to find out they may need the second appraisal.
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