FHA Guidelines on Buying House Flips

This guide will cover the FHA guidelines on buying house flips. The following paragraph will cover the FHA guidelines on buying house flips. Property flipping was extremely popular before the 2008 Great Recession and Real Estate Market Crash and has almost stopped. However, house flipping is now back in full force. Many real investors are purchasing homes such as foreclosures, rehabbing them, and flipping them for a profit. Many property flippers have large construction crews. This article will discuss and cover FHA guidelines on buying house flips.

Renovating Homes By Property Flippers

Many real estate investors can normally get a home rehabbed in less than 30 days after the date of their home purchase. However, they cannot sell the rehabbed home to an FHA homebuyer. This is because, under FHA guidelines on buying house flips, homebuyers cannot purchase a flip unless the house flip has been seasoned for at least 90 days. This is one of the dumbest rules ever implemented, hurting home buyers, sellers, and the economy.

Nothing is wrong with a real estate investor purchasing a home that needs work and rehabbing it and reselling it for a profit. There are real estate investors out there who can turn around a complete gut rehab in less than 30 days on a single-family home.

Rehabbed homes are better than brand-new construction homes. But due to FHA guidelines on flips, homebuyers who are only approved for FHA loans cannot purchase a house flip home sellers with less than 90 days of seasoning.

FHA Guidelines on Buying House Flips: Setback on Real Estate Investors

FHA guidelines on buying house flips are extreme setbacks and inconveniences for real estate investors because this rule limits the pool of home buyers for their rehabbed homes.

FHA guidelines on flips impact not just the real estate investors. It also impacts home buyers who fall in love with a rehabbed home but cannot purchase it. This is because the home is a flip and has been seasoned for less than 90 days.

The 90-day waiting period does not apply to Fannie Mae and Freddie Mac, which means that conventional loans do not have any 90-day waiting period. Real Estate Investors who need to flip their homes in less than 90 days can only sell them to a home buyer approved for conventional financing, not FHA financing.

FHA Guidelines on Buying House Flips: Waiting Period To Purchase Home From Property Flips

FHA guidelines on buying house flips off the 90-day waiting period starting from the date the property seller has purchased the home. Most home-purchase closings average 45 days. If the real estate investor purchased a property and took about 45 days to rehab it, and if they were to have it under contract after 45 days, it would take another 45 days to close, so the 90 days would be up, right?  Wrong!!! Dale Elenteny of GCA Forums Mortgage Group says the following about FHA guidelines on buying house flips:

FHA guidelines on buying house flips is 90-day waiting period rule start from the date the property owner has purchased the home. The date of the executed contract and not to wait 90 days to close from the time the real estate investor closed on their home purchase is the 90-day waiting period start date.

Why this rule was implemented has many confused, and the FHA guidelines on buying house flips do not make any sense whatsoever. Unfortunately, these are the rules, and until the FHA guidelines on the house flip change, it is here to stay for the time being. We will keep our viewers updated on any changes HUD will make concerning FHA Guidelines in future blogs.

FAQ’s on FHA Guidelines on Buying House Flips

Below are the most commonly asked questions (FAQs) on FHA Guidelines  related to purchasing house flips. These FAQs summarize the most pertinent requirements and issues relevant to buyers and investors who wish to finance a house flip through an FHA loan. Other specifics differ, so discussing those details with an FHA lender or a housing expert is advisable.Q1: What are the guidelines FHA sets regarding purchasing house flips?

A: FHA guidelines address the safety, livability, and overall condition of a house that has recently been acquired or is getting ready to be flipped. This usually involves some rehabilitation work. If the house is undergoing a flip, there should be an adequate audit trail of the renovation work done, and all should be within FHA’s prescribed quality and cover safety parameters.

Q2: Is purchasing and flipping a house with an FHA loan possible?

A: The house must have undergone earlier renovations or flipping. The only other caveat here is that the house must meet the minimum property standards of FHA, be fully documented, and be requisitioned at the time of appraisal. Some buyers might want to look into additional work after-buyer FHA 203(k) rehabilitation loans.

Q3: What condition must a flipped property meet to qualify for FHA approval?

A: The property under consideration for FHA approval must:

• Pass an appraisal for an FHA loan that validates all renovations have been done to an acceptable level.
• Be safe and habitably livable, which includes its structure, roof, electrical, plumbing, and heating systems.
• Not include any dangers such as lead paint or other code violation issues.
• If relevant, prove that licensed and insured contractors completed all work.

Q4: Is there any other additional paperwork necessary for house flips?

A: Yes, which includes the following:

• A complete list of all boundary changes, supporting documents, payment receipts, and issued permits.
•  Evaluation reports partaking in the quality proportion of varying compliance with the works carried out.
• Records of the property’s background to ensure it was not acquired for ready-opportunity resale without meeting the FHA standard requirements.

Q5: In what way does the FHA 203(k) loan program connect with house flips?

A: For interested buyers intending to combine buying with rehabilitating a building, the FHA 203(K) loan program is most suitable. This program is tailored to those needing maintenance and additional work done on the property. Flippers can include the funding needed for maintenance and rehabilitation after acquiring the property in one loan. The property must still be checked for FHA’s general requirements and appraised before and after renovations.

Q9: Why is the FHA appraisal important for the steps in the process?

A: The appraisal is needed for the process because it determines the value of the real estate while also confirming the borrower’s minimum standard property requirements. The appraiser will evaluate the quality of the work done, the essential repairs, the security and safety of the property, and its livability. All the points determined during the appraisal must be addressed before finalizing the loan.

Q11: Is there an outline the house has to abide by before being bought with FHA financing?

A: Not really. No outlined specifics are given, but the FHA stipulates that no formal parameters have been established for how recently a flip has occurred. The property must be in a condition where one can see the undertaking was done and that meets FHA guidelines attested by the appraisal. If the evidence for the flip looks too hasty, the lender will suspend the approval until the criteria are satisfied.

Q8: What considerations must be taken with an FHA loan when buying a flipped home?

A: Buyers need to:

• Confirm all work done has been completed with permits, receipts, and a contractor list.
• Obtain an FHA appraisal by an FHA-certified professional who can guarantee the home meets FHA standards.
• Obtaining an FHA 203(k) loan may be easier if further repairs are required.

Engage directly with an FHA lender with the necessary authority and routinely work with flipped properties. This response attempts to answer questions relating to house flipping using the FHA guidelines on buying house flips. Due to some unique situations involving further renovations and more intricate loan needs, the situation is best resolved with an official real estate expert or an FHA lender.