Weekly Mortgage Update: Property Flipping

This only applies to buyers using the FHA loan. 

Here is the current rule:

If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for an FHA insured mortgage. (Note: resale date is the date of the contract.  So you can write or have a contract written on day 91.) 

• There are some exceptions to this including:

§  Properties acquired by government entities.

§  Properties acquired by an employer or relocation agency.

§  Inheritance.

§  Sales by financial institutions.

Two appraisals are required when:

• The property is re-sold between 91 and 180 days following the acquisition by the seller
  
• The resale price is 100% or more over the price paid by the seller

FHA reserves the right to require additional documentation from the lender to support the resale value if:

• The resale date is between 90 days and one year and the resale price is 5% or greater than the lowest price of the property in the previous 12 months
• This is a post closing deal that you would never see but it does motivate underwriters to look for flips that don’t make sense.