HUD Anti-Flipping Law
Ok this just stinks. I had to vent a little.
Many of you may already know about this new law that went into effect May 1, 2003. I did not. Maybe you already discussed it here. Here it is:
FHA will not loan money to someone if they are buying a house that has previous been sold in the last 90 days.
Between days 91-180 the lender is required to get 2 appraisals and depending upon the mark up percentage other restrictions apply.
Here's the link. if it gets edited out then just do a google search for "HUD anti-flippnig"
http://www.hud.gov/news/release.cfm?content=pr03-055.cfm
That is correct. It should not be a problem. If you are doing a sizable rehab, the first three months should not be a problem. Also make sure you keep all receipts and take before, middle, and after pictures. If you are using a contractor, the contractor should be willing to give you copies of receipts.
Finally, there are still plenty of lenders who will lend with no seasoning requirements. We have been dealing with this for over a year and a half. It should not affect what you do.
I'd to like to hear some more about this from people that know. Seems like it could become a major hassle.
I know the types of properties I was planning on rehabbing were not the type that would take 3 months worth of renovations....
Note that this rule only involves FHA insured loans. The greatest portion of loans run through either fannie or freddie, so this rule won't affect many of you.
Subprime lenders are on top of the whole flipping thing these days. Many subprime lenders will not take the deal for up to a year.
Conventional lenders have not quite caught on or have not been affected so much.
So go out and market for a buyer that can qualify for a conventional loan and you should not have a problem.
Servier,
Even if you are doing paint and carpet it should not be much of a problem. There is always a lender out there who will do the deal.
Well it cost me a deal. For whatever reason the buyer needed to stay with FHA and coudn't go conventional. I was helping with his downpayment (Ameridream) and closing costs. Maybe conventional lenders don't allow gifted downpayment help.
Jam,
It was not a conventional loan. It was an FHA loan. FHA guidelines are no loans with less than 90 days seasoning. Loans between 90 and 180 days seasoning require 2 appraisals and documentation of repairs. After 180 days FHA will insure.
My concern is that in my area most buyers are cash poor and have poor credit. Houses sell for less than 90k and I usually pay the buyer's down payment (via Ameridream, etc) and their closing costs. FHA seems the most liberal with buyers in this situation.
I am trying to get this buyer to go see a mortgage broker. It may cost me extra since the buyer is cash poor, but I want to move the property.
If FHA is the only way to move it, then you may want to start your buyer on a lease option. You can collect more than market rents, and put the difference toward the downpayment. It doesn't give you the immediate cash, except for the option fee, but it will cover your carying costs, and give you some income.