UPDATE: HUD HAS EXTENDED THIS WAIVER THROUGH DECEMBER 2014. Information in this post from March 2010 may be outdated – as are many blog posts about mortgages (thanks to our ever changing guidelines).
I recently shared with you some of the upcoming changes to FHA insured loans that were addressed in a letter from HUD’s David Stevens. In this letter, he reminds readers that FHA has recently “waived the regulation that prohibits the use of FHA financing to purchase properties that are being resold within 90 days of previous acquisition”.
Due to previous FHA guidelines, investors who purchased homes to renovate and resale in a short period of time (90 days), would not be able to accept an offer from an FHA buyer. They were limited to cash buyers or those who qualified with conventional financing. From Stevens:
“During this period of high foreclosures, FHA wants to encourage investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes for homebuyers. Our aim is to help stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all properties being resold within the 90-day period acquisition and is not limited to foreclosed properties.”
The waiver takes effective February 1, 2010 and not every flipped home will qualify. Per the Waiver of Requirements:
- All transactions must be arms-length with no identity of interest between buyer and seller or other parties participating in the sales transaction.
- If the sales price of the property is 20% or more above the seller’s acquisition cost be prepared for extra scrutiny. A second appraisal will be likely required as well as an inspection ordered by the lender.
The waiver is set to expire one year, unless it is extended or withdrawn from the Commissioner. More information is expected to follow from a HUD Mortgagee Letter.
Currently, the FHA loan limits for single family residences in King, Pierce and Snohomish counties is $567,500. FHA mortgage insurance is set to increase on case numbers issued April 5, 2010 and later. And this summer, the amount a seller can contribute to allowable closing costs will be reduced from 6% to 3%.
I won’t mention that the Home Buyer Tax Credit is expiring in 50 days on April 30, 2010 (oops…guess I just did)!
If you would like a rate quote for an FHA insured mortgage for homes located anywhere in Washington, please click here. I have been originating FHA mortgages at Mortgage Master Service Corporation since April 2000 and I’m happy to help you.