Helping you save your credit and avoid foreclosure

FHA Flipping rules:

Here is some information on the FHA flipping rules. For background, go to http://www.hud.gov/news/release.cfm?content=pr03-055.cfm. Another link that may be of help is: http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2003/03-10778.htm .

The FHA flipping rules were put into place to protect unsophisticated buyers from purchasing a home at greatly appreciated prices, and also to protect the lender from predatory lenders and dishonest appraisers. The rule restricts FHA from doing FHA loans on a property within 90 days of transfer of title. After 90 days, the property would need a second appraisal. After 6 months the property value would have to be confirmed with an appraisal review. After 12 months, most lenders will allow valuations off of the appraised value, rather than the purchase price.

When FHA came out with these guidelines, it was followed by most of the "A" credit, FNMA conventional lenders. In order to get a first mortgage on a property within the first three months you have to carefully document all of the expenses involved in rehabbing a property (if a rehab). If it is not a rehab, but a foreclosure property, you have to document that it was bought below market value.

Even the "B" Credit lenders have followed the FHA flipping rules, and it is difficult to find a lender that will do a loan on a property and use a valuation other than the original purchase price within 12 months.

The easiest way to get around the FHA flipping rules is to assign the contract or put the property into a lease option and sell it after 12 months.