FHA Anti Flipping Rule and Fannie Mae 3% Down Loan

3 Replies

I only watched the first few minutes, but he got a couple facts wrong.

The most important one is that he said that sellers now need to wait 91 days before they sign a contract with an FHA buyer. Unless the lender has an overlay on the FHA requirements (and pre-2010, some did), this isn't true. The seller can sign a contract with an FHA buyer prior to 90 days -- they just can't sell the property until Day 91.

While it may sound like a minor detail, it's not.  If you have to wait until Day 91 to put a house under contract, it's likely that you'll wait until Day 120+ to close; but if you can put a house under contract prior to Day 90 and close on Day 91, you can decrease your holding period by a month or more.  For a 3 month hold, that's an increase of 25% in annualized return.  Nothing minor about that.

I assume the rest of the video is about the fact that FNMA has a 3% down loan that doesn't have the 90-day title seasoning, and he is recommending that sellers steer their buyers towards this loan instead of the FHA loan. Which is something that we've been discussing here on BP for a couple months now...and obviously makes sense.

@J Scott 

In my experience Mortgage Companies have been all over the board on this rule before, during and I assume even after the Waiver expires

Some have requires only that the closing takes place on day 91 or later, however some have required that the contract not be executed until day 91(Which as you said makes a huge difference in holding time of the asset).  Some during the waiver period have required 2 appraisals even up to 1 year !

For this reason, before I will respond to a financed offer, I will contact the buyer's lender and preferably talk to the underwriter to verify their policy and respond to the offer accordingly.

Originally posted by @Greg H. :

@J Scott 

In my experience Mortgage Companies have been all over the board on this rule before, during and I assume even after the Waiver expires

Some have requires only that the closing takes place on day 91 or later, however some have required that the contract not be executed until day 91(Which as you said makes a huge difference in holding time of the asset).  Some during the waiver period have required 2 appraisals even up to 1 year !

For this reason, before I will respond to a financed offer, I will contact the buyer's lender and preferably talk to the underwriter to verify their policy and respond to the offer accordingly.

Absolutely agree with you. Just important to point out that FHA allows contracts to be signed prior to Day 90 and closing on Day 91...it's the lenders who institute more stringent rules on top of FHA requirements.

This is why anyone who sells to FHA buyers should have a mortgage broker they work closely with, and should refer their buyers to their mortgage broker to ensure the process is as streamlined as possible.

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