If finance a flip with conventional mortgage? would that be ok to sell right away in 1 month?

20 Replies

You have to show an increase in value via work done to the property. To close and in 1 month market it for sale would probably be an unrealistic scenario if you plan to make a good profit. The problem will come when you go to sell. Seasoning (how long you have owned it) is a factor to lenders of the buyer as well as why the price is inflated from the recent sale.
If you can show significant improvements and don't have problems with seasoning then more power to ya!

Hopefully not too discouraging, but it's just not going to happen like that 99% of the time.

I wonder that too, how about wait for 3 months before listing?
I have seen people sell more than 100% profit with little remodel sell in 3 months. strange market.

If your buyer will have fha or conventional financing, you will have added challenges in getting the deal done.
Additionally, depending on the lender, if the loan is in existence for less than 2-3 months, the mortgage broker will have their commission recalled.
It's unlikely that the loan servicer would prevent you from borrowing from them again.

I agree with Larry there is really no problem financing conventionally and selling right away in one month as long as you purchase it as an investement property. The issue you will have is you will not be able to sell the property without some improvements, the system at bigger banks automatically flag the file and ask for desk reviews to account for increase in value. If there is no improvement then you will have a hard time selling right away. Why would the property increase in value with zero improvements in a month. Expect the appraisal to be reviewed multiple times.

Since it's unclear exactly what the OP is asking, let me clarify what I think everyone is saying:

1. There should be no issues selling in one month from the standpoint of the lender holding your mortgage (assuming it's an investment loan). They may not be happy that you only held the property for one month, the broker/loan-officer may not get commission, and if it's a smaller bank, they may not choose to work with you again, but they can't/won't stop you from reselling as soon as you'd like.

2. From the standpoint of your buyer's financing, while the fact that you have a conventional mortgage won't make any difference, just the fact that you are reselling so quickly may cause issues. For both FHA and conventional loans on your buyer's side, you'll need to prove that you've done adequate improvements before they'll allow you to resell that quickly, and with conventional, even the improvements may not help. If your buyer is using cash, there shouldn't be any problems whatsoever.

I heard if a conventional buyer put down more than 30%, the loan is mostly approved if the appraisal comes inline. I personally have seen someone resell for 100% gain within 4 months too, they have no very little rehab, just add the desk, finished the floor.

Don't think you will be doing this, if your concept of "conventional" is a Fannie Mae loan. See page 7, paragraph 6 of this next link; this is excerpted in a quote below:
https://www.efanniemae.com/sf/formsdocs/documents/secinstruments/doc/3039w.doc

Originally posted by PENNSYLVANIA--Single Family--Fannie Mae/Freddie Mac UNIFORM INSTRUMENT Form 3039 1/01:
6. Occupancy. Borrower shall occupy, establish, and use the Property as Borrower

I am buying as investment property not FHA owner occupied.

In this case, do I buy general rental insurance or vacant insurance?

My insurance agent with Farmers told me, it is only ok with the rental insurance for the first month while rehab. after one month, I have to change to vacant policy?

Hey Steve,

FNMA purchases both OO and investor conventional loans; the information you posted is absolutely correct OO loans, but for investor loans, there is no requirement for occupancy by the borrower...

Most people think about conventional loans strictly from an OO standpoint...in fact, I think a lot of people don't even realize that FNMA does investor loans as well...

Shortest best answer;

If you are flipping a property, finance via Hard Money or Private Money, never conventional.
Why? Banks follow 90 seasoning rule, weather law or not, and it is tucked neatly into that 3' stack of papers you sign in a conventional. To fight it will make a lot more trouble then it is worth. And if you can get conventional, you could get Hard Money, which has none of the sell hassles.

If you are holding a property; get Private Money. Sure, you could go conventional, but why? Have you ever actually read the contract you sign with a conventional loan? Do you know all the control you are giving them? Cut out the middle man, retain the control.

Have anyone ever done that before? using conventional finance a flip? I believe it is legal due to I see no where to restrict you not to sell within 3 months after closing.

Originally posted by james hamling:
If you are flipping a property...never conventional.
Why? Banks follow 90 seasoning rule, weather law or not, and it is tucked neatly into that 3' stack of papers you sign in a conventional.

I don't believe you are correct.

Not only have I never seen a contract restriction on holding time for a conventional loan (I've gotten conventional loans that I've paid off in less than 30 days), I've never seen a prepayment penalty that applies to a specific period of time, I've never seen a deed restriction imposed by a conventional loan contract and I've never read in any conventional loan docs that the borrower is required to hold the loan for a specific period of time.

Maybe I've just been missing it. Can you provide further detail about how this restriction is written into the contract and/or how it is enforced?

Originally posted by Larry L.:
Have anyone ever done that before? using conventional finance a flip? I believe it is legal due to I see no where to restrict you not to sell within 3 months after closing.

See my post above...

I've done this on a couple occasions. That said, the big issue you'll run into with conventional loans on an investment property is that the lender will require an inspection, and if the property isn't move-in-ready, your loan will likely be denied.

Even minor issues like a non-working water heater or a missing AC condenser can mean the deal won't get funded.

I even see people buying primary home for flip in less than a year. Not sure how the lender can go after you if you come up with a good reason to sell, unless it's HomePath properties which require you to pay them $10k if you sell in less than a year.

alright, got a question for you. lately my friend asked what happened if he received credit from his conventional lender at closing and he resell the property in 4 months?

He got $4560 from his lender at closing, if he sold the property in 4 months, the lender will loss big.