FHA 90-Day Rule Update

January 17, 2010 · 8 comments

First, thanks to the 40 or so people who sent me email about the pending changes to the FHA 90-Day Flipping Rules. And I mean that with all sincerity — I truly appreciate when my readers and colleagues keep me updated on what’s going on in the real estate world. In fact, I was traveling all last week, so without these updates, I probably still wouldn’t have known the big news…

As of February 1, 2010, the FHA will be waiving their 90-Day Rule for flipping houses. The waiver is planned for 1 year, though that can obviously change at any time.

This means that investors will have the option to resell houses they purchase and renovate at any time after their purchase, without the requirement to wait 90 days prior to selling to an FHA buyer.

According to the official FHA documentation, there are a few (fairly obvious) requirements for these transactions:

1. All transactions must be arms-length, meaning that there must not appear to be any impropriety taking place between buyer and seller. This requirement also indicates that any prior flipping activity on the home in the previous 12 months may be a red flag to the lender.

2. In cases where the sale price exceeds the previous purchase price by more than 20%, the lender will be required to take extra steps to ensure the sale is legitimate. This includes a second appraisal and a full FHA inspection.

3. The waiver only applies to forward mortgages, and not to Home Equity Conversion Mortgages (HECM).

The waiver of this rule will most likely have a huge impact on the real estate investing community short term. I’m certainly looking forward to the positive impact it will have on our business.






8 responses to “FHA 90-Day Rule Update”

  1. Like most investors, I’m certainly happy with the waiver. I must say it’s a long time coming.

  2. Bilgefisher says:

    I say your blog post on this, and then saw 4 other spots with the information. Thanks for the heads up, I musta been hding in a hole these last few days.

  3. […] reports that there are certain guidelines which lenders are directed to follow: 1. All transactions must be arms-length, meaning that there must not appear to be any impropriety […]

  4. […] reports that there are certain guidelines which lenders are directed to follow: 1. All transactions must be arms-length, meaning that there must not appear to be any impropriety […]

  5. Karen Meyer says:

    Does anyone have an update on whether or not lenders are changing their rules to make these loans? I have a property that is ready to go and I have buyers wanting to get in on the $8000 credit. I bought the house on February 1 and recorded the deed a week later. If we have to abide by the 90-day rule we will have to write the contract in May missing the $8000 credit.

  6. Steven Ciambelli says:

    Is the waiver still in play or not? I put one under late sept.010 60 days after i bought it ..after almost 2 1/2 months of waiting for closing..loan was declined according to mort. broker due to 90 day rule..This doen’t sound right to me..

  7. J Scott says:

    Steven –

    The waiver is still in effect, but what many investors have seen over the past year is that many of the lenders out there still require 90 days before they make the loan — this isn’t required by FHA, but the lenders are doing it themselves.

    That said, there are lenders out there who will do this type of loan, you just need to find them. Talk to a couple local brokers who can shop the loan to multiple underwriters/lenders and who can hopefully find a local or regional bank who can get this done. In fact, we just found out that Wells Fargo is able to do a sub-90 day FHA loan for our most recent buyer, so even some of the big banks are doing it now as well.

  8. Fred Roven says:

    I wondered if anyone knws what HUD is planning after waiver expires Feb 1?

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