Un-seasoned Mortgage?
I talked to a lender today that told me it would be very difficult for a purchaser to get a loan if I buy and rehab a home and hold title for under 12 months. I am new at this but after reading so many books and web pages i did not realize how technical this situation was. I am hoping that I just spoke with a very cautious lender and that it is not like this everywhere. I am just trying to find out if this is the norm.?? If so I will need to re-think my game plan, maybe with L/O eventhough I don't want to have to wait that long for a profit. Also does buying with cash change the situation? 
Your real issue is what we call title seasoning -- how long has your name been on the recorded title. New HUD regulations prohibit FHA from insuring a loan if the seller has not been on title for at least 90 days. There are other documentation requirements to justify the amount of the profit if the property is being sold between 90 days of ownership and one year. An FHA loan in this window is not impossible, however. The HUD regulation only applies to FHA loans, though other lenders appear to be incorporating this restriction into their own lending guidelines.
Paying cash for the property initially does not change your period of ownership. Any lender your potential buyer will use is not really concerned with how long a lien has been on a property.
A good mortgage broker will have lender resources who do not care about title seasoning.[ Edited by DaveT on Date 01/28/2004 ]
thanks so much for the info. what is the documentation that you are talking about? Is it for proving to the lender that nothing shady is going on.
Pretty much. You need to prove that your rehab and repairs were actually performed and that they really increased the value of the property to your asking price.
also, your lender can get around the drama by doing the loan for the buyer as a conventional and not an FHA. Most lenders are able to do this loan as long as the comps are there.
I new that there had to be some way around it because I don't hear much about investors being held back because of un-seasoned loans. Something else I just thought about, I have enough money to buy a house but I thought it would be wiser to break that money up into 4 or 5 downpayments for loans, will lenders give me that money if they know I am going to flip in a short time?
Once again, the problem is not loan seasoning. The problem is title seasoning.
You should have no problem getting as many loans as you qualify for. You may have a problem flipping the property if your buyers can not get financing because you have not been on title long enough.
As has been said in this forum, there are lenders who do not worry about title seasoning but these will most often be the non-conforming loan products.
Check with smaller local banks. Most often they do not require title seasoning and are much more user friendly.
[addsig]
Thanks everyone for all of the feedback. I am just going to start calling lenders until I get the response I am looking for.
um, I thought the small local bank is the strictest of them all? At least up here in the northeast they are...
Local banks can be a great source for investment property funding. My banker knows me by name and that is something that I worked very hard for. Local banks in my exsperience can be more flexible in there lending practices than the larger ones.
There are many lenders that do not season the title (or only require 30 days for example). The lender you talked to does. Time to start calling more lenders.
Another option is to sell it on contract for dead, lease option, or sub. to. Do a period of 24 months. That gives them time to refinace after it's been seasoned for 12 months.