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FHA 90 Day Flip Rule: Flip Flop

by Justin McHood on March 23, 2010 · 6 comments

  

One of the more frustrating things regarding FHA loans right now has to do with something called the “90 day flip rule”.  In what has now become known as the FHA Flip Rule, FHA has stated that if a borrower wants to buy a house that was bought by an investor previously in order to flip the house for a profit, there are certain conditions that apply.

Sometimes people accuse HUD of speaking in riddles when it comes to these types of things – because in their best attempt at being crystal clear as to what kinds of loans they will insure and what kind they won’t – the end result is still confusion.

Some lenders will lend money to people who are attempting to get an FHA loan for a property that has been purchased by the previous owner within the last 90 days.

And some lenders won’t.

Some lenders will lend money to people who want an FHA loan for a property that has been purchased by the previous owner within the last 90 days as long as the new sales price isn’t more than 20% of the previous sales price.

And some lenders won’t.

Some lenders won’t lend money to people who want an FHA loan for a property until it has been “seasoned” and at least 90 days have expired since the last party bought the property.

But some lenders will.

So to recap:

  1. Some lenders won’t give you an FHA loan if the property you would like to purchase has been bought in the previous 90 days by someone else.
  2. Some lenders will give you an FHA loan if the property has been bought in the previous 90 days by someone else as long as the price you want to pay for it doesn’t exceed 120% of what the previous owner paid for it.
  3. And some lenders will give you an FHA loan if the property has been bought in the previous 90 days regardless of how much the previous owner paid for it.

Are you confused yet?

You should be.

And sometimes I wonder if all this confusion is by design.

What This Means To You: The Consumer

If you find a house that you would like to buy and are planning on getting an FHA loan – be ready for different lenders to tell you different things about this FHA 90 Day Flip Rule.

Those flip-floppers.

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{ 6 comments… read them below or add one }

J. Lamar Ferren March 23, 2010 at 7:45 am

Wow that is extremely confusing. They just need to do away with the rule. lol That would make things easier for us. :-)

Reply

Aaron Pfeffer March 23, 2010 at 8:14 am

ok, so who are the lenders that allow?

Reply

Joshua Dorkin March 26, 2010 at 10:59 am

So there are no standards, then? How does one reliably do business with these loans?

Reply

Justin McHood March 26, 2010 at 11:12 am

@Joshua,

Correct – there is not one single standard. And the magic words I keep hearing from different lenders are sprinkled with “layers of risk”.

Some lenders think that they can get FHA to insure the loans so they lend the money.

Some don’t think they can get FHA to insure the loans so they don’t.

How can they reliably do business that way?

It is a great question with no real answer.

@Aaron,
Here is one lender that is currently doing them – Academy Mortgage. I am sure there are others – but you can start there.

@J,
I will put your request in the next time HUD asks me for advice! :)

Justin

Reply

Nick Dailey March 29, 2010 at 7:47 am

I think you can still sell for >120%, but it requires 2 appraisals.

Reply

Chris April 30, 2010 at 8:46 pm

Please read, I need the correct answer to this…… My name is Chris, my issue is that my wife and I signed a purchase and sale on April 3, 2010 for a FHA loan. The house we’re trying to purchase, was bought in February and then the sellers have flipped it. The flipping law states that you have to wait 90 days in order to sign and date the application. Since we signed the P and S on April 3, 2010, would we still qualify for the tax credit? Or do we need to sign a new P and S after the 90 days are up?

Reply

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