FHA 90-180 Days Rule

[Irfan Saeed]

Hi Guys - I would appreciate the help in this regard :

My newly rehabbed house is in pending status and the FHA approval is in progress. Today I got an email from the lender that if the house is being sold more than the 100% value of previous resale then :

I have to provide them the documented proof like CD, rehabbed cost etc. Along with that they are asking for a second appraiser.

My question is : is this a normal course of action from the lender. Should I be worried about this ?

Thanks

[Chris Mason]

Hi @Irfan Saeed,

The FHA flip rule is standard. Comes up a lot here in Oakland CA, actually.

Flippers entertaining 3.5% down offers on their flipped SFR that they quickly doubled the value of (according to the two sales prices) should point their buyers (or buyer's agents) to this commercial. Have the buyers, if they are FTHB, use 3% down Fannie Mae instead of 3.5% down FHA. If they aren't FTHB, or otherwise can't swing FNMA HomeReady (income limits by census tract of the property, for example), and can't do 5% down conventional, and time is critical (because your HML rate is 15%, you need to recoup capital for the next deal, etc), find a different buyer.

You aren't pressuring your buyer to take a crappy loan, for the record. For decent credit scenarios, conforming loan amounts, and FTHB, FNMA HR is almost always a better deal than FHA. It just takes an extra 2 hours of work for the LO, which is why you don't often hear about this excellent Agency loan program. Any FNMA lender can offer FNMA HR. So you're going to make the buyer's LO "suck it up, buttercup," do the extra 2 hours of work, and as a result your decent credit first-time homebuyer will get a better deal on the financing AND your flip will sell a few weeks faster.

EDIT: In your specific scenario right now Irfan, it probably makes sense to move forward with FHA. That'll be quicker than starting over as FNMA. This is mostly for lurkers, and future reference for you, so your next flip can be more profitable than this one.