FHA Lending Policy- Changes!
Big announcements in the FHA lending policy! It is important to understand what they are doing, and how it can affect your investments. The FHA Seasoning policy…AKA “flip rule” is being lifted! Effective Feb 1, 2010, investors can purchase a foreclosed home, fix it up and sell it as quickly as possible! No more waiting 90 days to season the house before you can sell it to an end buyer! The previous FHA policy restricted sellers from even ENTERING INTO A CONTRACT with a buyer until they had owned the house for 90 days! This policy was very restrictive to our investors because “time is money”….and you want to turn as many houses as possible.
This rule only applies to foreclosed homes, and is only in effect for ONE year. For details go to HUD website.
FHA Lending Guidelines
Being on the inside of Tampa’s investment market, I want to add my opinion of what a large impact this rule actually has on our investment opportunities. Over the past 11 years, I’ve seen the physical condition of available investments change dramatically as the market changes. Think about it. In 2004, demand for investment houses was very high, so prices were rising and buyers/investors HAD to be less picky about the physical condition of the houses. Investors were buying anything they could get their hands on. Whether the house needed $5K in repairs or $50K! In the position of today’s market, we are flooded with available investments – mostly foreclosures, so we are able to be picky and select houses that need less work. This means our investors will spend LESS TIME fixing up the house! Now with FHA lending policy lifting their seasoning requirements, our investors have a great opportunity to buy/fix/sell multiple properties in 2010!
The Only Constant is Change
Another important detail is that most of these foreclosures were purchased in the past 5 years. When the previous transaction took place, the buyer (who was eventually foreclosed on) used conventional financing. The conventional lenders (i.e. Washington Mutual, Bank of America, Countrywide) all required appraisals done on the house before they issued the mortgage. The appraisers did an inspection of the main elements of the house including the plumbing, roof, A/C and electrical. And although the inspections were not as thorough as something done by a licensed contractor, you know that the basic elements of the house were in good condition within the past few years – thus increasing your ROI.
Now is a great time to take the leap, buy your first investment property, and sell it quickly using FHA Financing!