FHA 90 Day Flipping Rule Waived

With so many foreclosed properties on the market right now, the time has been ripe for rehabbers to get into the market.  They can take these properties that may be otherwise unlivable (and can not have a mortgage put on them), buy them, fix them up, and then resell them making a profit.  It is a win for the rehabber, the buyer of the new beautiful house, the neighborhood, and even the economy (as we put people back to work and buy materials).

One speed bump in the sale of these newly rehabbed houses to the end buyer has always been that if the buyer is using FHA financing, (with certain exceptions) FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days.  With many of these rehabs taking 60 days or less, this can mean that you must lose an additional 30 days of interest while you wait with the property empty until the 90 day mark.  The loan process can not even begin (and the purchase agreement can not be dated) until day 91.

Many of the rehabbers were unwilling to wait the 90 days to resell to anyone with FHA financing. HUD realized that this restriction was shutting FHA buyers out from newly renovated homes, many of which were priced for first time home buyers. This week HUD announced a temporary waiver that removes this restriction.  The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The waiver will take effect on February 1, 2010 and is effective for 1 year, unless otherwise extended or withdrawn.  This is good news for everyone.

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