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FHA Property Flipping:

Since 2003 the FHA would not guarantee a loan if the seller had owned the property for 90 days or less. In an effort to stimulate the housing market, the FHA waived their rule regarding property flipping on purchase contracts on or after February 1st of 2010. Currently the FHA will guarantee a loan regardless of how long the seller has owned the property with the following conditions.

1. All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
2. For cases in which the sales price of the property is 20% or more over and above the seller's acquisition cost, the lender must justify the increased value with supporting documentation and/or a second appraisal which verifies sufficient legitimate renovation, repair and renovation. Where no such work is performed, the appraiser must provide an appropriate explanation of the increase in property value. The lender must order a property inspection and provide it to the buyer prior to closing. The cost of the inspection can be charged to the buyer.

While length of ownership does not prevent FHA financing for your buyers and sellers, it is important to know that additional costs could be involved including a home inspection & 2nd appraisal.

Sandra S. Madison
Senior Mortgage Loan Originator
NMLS # 43902 & MLO-7436VA
(434) 566-2420 direct line
www.suntrustmortgage.com/smadison

SunTrust Mortgage
682 Berkmar Circle
Charlottesville, VA 22901

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