FHA 90 Day Flip- From Date of Settlement or Date Deed Recorded?

Question

Hi- apologies if this has been asked before, but is FHA 90 day rule from the date the property was purchased (settlement date as shown on HUD), or the date the deed was recorded?

Thanks, Jon

J Scott · Answer

The FHA 90 day rule was implemented a long time ago, but has now been waived -- this means that you no longer need to wait 90 days to resell.  That said, some lenders will still impose the 90 day resale restriction, just because that's their policy (and because it was FHA policy for a long time).

But, to answer your question:

- You don't need to wait 90 days if you find the right lender.  Stick with the regional banks and Wells Fargo for your best chances of finding a loan officer to get this done;

- If you run across a bank that still has this restriction, 90 days from settlement is most common, but I've seen a couple banks doing 90 days from deed recording.

Regardless, whoever you go with, get a direct answer on their requirements directly from an underwriter before proceeding.

Jonathan C. · Answer

There we go-- thanks, Bryan... yeah I hadn't heard of the 91-180 day restrictions, but there you go... guess they are an FHA restriction and not some weird requirement of this particular lender.

Thanks everyone

Bryan R. · Answer

J. Scott -  I believe that applies only to 24 CFR § 203.37a(b)(2). For between 91-180 days the following section applies:

(3) Re-sales occurring between 91 days and 180 days following acquisition. (i) If the re-sale date is between 91 days and 180 days following acquisition by the seller, the property is generally eligible for a mortgage insured by FHA.

(ii) However, HUD will require that the mortgagee obtain additional documentation if the re-sale price is 100 percent over the purchase price. Such documentation must include an appraisal from another appraiser. The mortgagee may also document its loan file to support the increased value by establishing that the increased value results from the rehabilitation of the property.

(iii) HUD may revise the level at which additional documentation is required under §203.37a(b)(3) at 50 to 150 percent over the original purchase price. HUD will revise this level by  Federal Register  notice with a 30 day delayed effective date.

(4) Authority to address property flipping for re-sales occurring between 91 days and 12 months following acquisition. (i) If the re-sale date is more than 90 days after the date of acquisition by the seller, but before the end of the twelfth month after the date of acquisition, the property is eligible for a mortgage to be insured by FHA.

(ii) However, HUD may require that the lender provide additional documentation to support the re-sale value of the property if the re-sale price is 5 percent or greater than the lowest sales price of the property during the preceding 12 months (as evidenced by the contract of sale). At HUD's discretion, such documentation must include, but is not limited to, an appraisal from another appraiser. HUD may exclude re-sales of less than a specific dollar amount from the additional value documentation requirements.

(iii) If the additional value documentation supports a value of the property that is more than 5 percent lower than the value supported by the first appraisal, the lower value will be used to calculate the maximum mortgage amount under §203.18. Otherwise, the value supported by the first appraisal will be used to calculate the maximum mortgage amount.

(iv) HUD will announce its determination to require additional value documentation through issuance of a  Federal Register  notice. The requirement for additional value documentation may be established either on a nationwide or regional basis. Further, the  Federal Register  notice will specify the percentage increase in the re-sale price that will trigger the need for additional documentation, and will specify the acceptable types of documentation. The  Federal Register  notice may also exclude re-sales of less than a specific dollar amount from the additional value documentation requirements. Any such  Federal Register  notice, and any subsequent revisions, will be issued at least thirty days before taking effect.

(v) The level at which additional documentation is required under §203.37a(b)(4) shall supersede that under §203.37a(b)(3).

J Scott · Answer

The rule is if the property is being sold for more than 20% above purchase price, additional justification of the value (i.e., second appraisal) is needed:

http://portal.hud.gov/hudportal/documents/huddoc?id=currentwaiver.pdf

See page 10, #2...

Bryan R. · Answer

For FHA financing the time period is calculated from the settlement date.

Once again this year the 90 day anti-flipping rules has been waived through the end of the year. However for most  properties resold in under 90 days FHA will require 2 FHA board appraisals and/or support for value added. What this proof of value added is kind of nebulous. I generally meet with the appraisers at the house, walk them through everything we did, ensure there are no health or safety concerns, and answer any questions they may have.

For further information see 24 CFR § 203.37,  Federal Register (Vol. 76, No. 249, Pages 81363 - 81365), FHA Lender's Handbook.

Jonathan C. · Answer

One other question on this... the lender who the buyer is using also told me they have a rule where if the property is owned more than 90 days but less than 180 days (so 91-180), and being sold for 100% or more than what it was purchased for (so bought for 90k and sold for more than 180k, for example), that they need 2 appraisals to be done in that case as well.

I wasn't able to find this on the FHA site-- curious if anyone knows if this is an FHA rule or not? I'm wondering if it's just the lenders rule...

Thanks

Jonathan C. · Answer

Thanks guys

Mike Jakobczak · Answer

It's from the day you purchase the property.  Not the day it's recorded.

Jake Kucheck · Answer

Neither.  Find a better lender.

FHA 90 Day Flip- From Date of Settlement or Date Deed Recorded?

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