Using Conventional or FHA for flips

[Susan Capeta]

I'm trying to use a conventional or fha loan for a flip, but my loan officer says its not a good idea because i have to live in the house for a year or it is considered fraud.. is this true?

Also he says there is a prepayment penalty of $5k if i sell the house before 7 months which makes a $400k loan very expensive... $10k cost of loan + $2k per month for 8 months = $26k for the loan .. that is extremely expensive

Is 20% conventional loan or fha a bad idea to do a flip? 

[J Scott]

Originally posted by @Richard Fields:

You can use an FHA loan, BUT, you have to live in the house for 1 year before you can sell it. If you live in it for a year, you may want to think about renting it out for another year. If you hold it for 2 years before you sell, you won't have to pay capital gains tax

 Living in the house for one year and renting for one year won't alleviate capital gains...you'd need to live in the house for two years yourself for that...