Clarification-HUD and Flipping - Posted by Ken (Fl)

Posted by Randy on October 10, 2003 at 09:33:17:

The end buyer going to live in the property or hold it for rental property and pay the mortgage can not get an FHA mortgage. If you are flipping the property and your buyer has cash or non FHA mortgage GO FOR IT???

Clarification-HUD and Flipping - Posted by Ken (Fl)

Posted by Ken (Fl) on October 10, 2003 at 06:43:05:

In a recent conversation with another investor, the comment “There is a flipping law for FHA loans as HUD has been burned badly” was made.
I have not had to flip with any HUD involvement and I remember many post stating there is no law against flipping just guide lines if you will.
Could you please clarify this so I can either be better informed or that I may pass this on to the other investor so they may be better informed?

Thank you,
God Bless,

Re: Clarification-HUD and Flipping - Posted by jasonrei

Posted by jasonrei on October 10, 2003 at 10:08:26:

No law, but there are guidelines FHA lenders must follow. You can “flip” a house you own, or one you just control. I only flip houses I own. I buy, fix up, and sell.

Many conventional lenders will not loan on a house where the current owner has held title for less than 12 months. I used to prefer selling to FHA buyers for this reason. Right before the summer, HUD changed their guidelines-

Since then I found a good conventional lender that doesn’t care how long I’ve owned my houses, so I steer my buyers to that lender. I did buy a house in mid-May that I fixed up. Got an FHA offer in late July. I told the lender that I’d bought the house just 2 to 2 1/2 mos earlier for about half of what I was selling it for. I provided the lender cancelled checks and job invoice for repairs. Provided appraiser with before/after pix and a list of improvements.
$35k buy
$20k documented repairs
$70k sale
Lender asked me to pay for another appraisal (the appraisal had a name but I forget what, it had something to do with supporting or justifying the 1st appraisal). Anyway, both were satisfactory. Closed on the sale about 3 1/2 months after my purchase deed had been recorded.

Had a nice offer recently for a house I bought in July and fixed up. Offer was VA. Countrywide said “no” because I hadn’t held title long enough. I’m pretty much fed up with FHA/VA now.

Re: Clarification-HUD and Flipping - Posted by Randy

Posted by Randy on October 10, 2003 at 09:12:38:

You are correct No Laws? Just Guidelines. FHA will not insure loans when the seller has held title on the property less than a specified time. That time varies depending on the seller?s ability to document increases in price. The minimum time is 90 days, maximum is 12 months.

You buy a property 10/01/03 for $100k and sell it 10/09/03 for $150k? no problem! The buyer can not get a FHA insured mortgage. Most conventional lenders will not make the loan because they sell their loans and receive a fee for servicing the loan. Private sources and secondary sources don?t care. HUD is the disposal entity of FHA. When a FHA insured mortgage defaults, it goes to HUD to be re-sold. HUD does not make loans, FHA insures loans made by banks and mortgage lenders to minimize their risk potential and make it easier to qualify for.

Re: Clarification-HUD and Flipping - Posted by Tammy

Posted by Tammy on October 11, 2003 at 23:33:27:

Could you disclose the lender that has no issue with with your seasoning please? We live and invest in NY -Much thanks! Tammy

Re: Clarification-HUD and Flipping - Posted by CL2

Posted by CL2 on October 10, 2003 at 09:21:52:

Could you please elaborate a little further with the scenario described previously? I’m trying to figure out if the “buyer” is the person who will be affected by the FHA requirements and not the person buying and then selling the prospective property within a week?