FHA began allowing financing on flipped properties on February 1, 2010, but as been the case, FHA lenders, including those in Orange County, were not quick to follow suit. However, within the past few weeks, several Orange County FHA lenders have begun to allow financing on flipped properties.
FHA Announcement on January 15, 2010 Regarding Flipped Properties
On January 15, 2010, FHA announced in a press release that it would be temporarily lifting the "90 day no flipping rule", effective February 1, 2010 through February 1, 2011. However, there are a few guidelines that need to be met.
- The seller and buyer cannot be related.
- If the new purchase price is 20% above the sellers acquisition price (within the last 90 days), then the lender may require a second appraisal. Also, the appraisal should have specific notations justifying the increase in value.
- If the property is being purchased for more than 20% of the sellers acquisition price, then the lender will require a home inspection report, which can be paid for by the buyer.
Orange County FHA LendersWill Allow Financing on Flip's, But with Major Caveat
Most lenders are now allowing FHA financing on flipped properties, but not if the property is being sold for 20% more than the sellers acquisition cost within the last 90 days. Unfortunately, this effects most flipped homes. For example, if an investor purchases a property at auction for $300,000, then he would not be able to sell it for more than $360,000 (and have an FHA buyer). The lender is not looking at the investors profit, just the acquisition cost versus sales price. While there will be some cases where FHA financing will work, it is important to know what financing is available before making an offer on a home with FHA financing. If a property is being sold for more than 20% of the recently acquired price, make sure the lender handling the financing can still do the loan.
Before even making an offer, it is important that Orange County first time buyers talk with a local Orange County Direct Lenderwho can walk them through the initial Prequal and PreApproval process.
Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Home Point Financial for more information about an Orange County, CA home loan. 949-829-1846
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