I hate how a flipped house can't be bought using an FHA loan! (Queen Creek: bank owned, short sale)

[mike.main]

Can someone explain to me why that's the case? (yet a VA loan qualifies).

I found a great house in Laveen that I really liked and I wanted to buy. Then I was told that it was flipped and there has to be a 3-month wait period before I can buy it using an FHA loan. I really hate that!

What's the lowest down payment they usually have for conventional loans?

Also, is there a PMI for an FHA loan?

Thanks for any help provided.

Mike.

[Rick Lee]

Well, it's been a while since I was in the biz. But when I was, an FHA appraisal stuck to a property for six mos., meaning if an appraiser filed with FHA and said it was worth $150k, then no one could get an FHA loan on it for more than $150k for six mos. So, if someone bought it with an FHA loan (why would a flipper do this?) and then tried to flip it in three mos., the original value was still stuck to it.

[oh2az2id]

I buy and fix up homes for a living and have for some time, so I have been dealing with this before. You can not get a FHA loan on a home that has been owned less then 6 months. The 3 months your talking about is not right or the owner has only owned it 3 months and needs another 3 months to make it 6. You cant even have a FHA contract on it until the 6 month time period.
This was a new thing about 5 or 6 years ago. It happened when there was some shady appraisals and shady loans going on, so the government in its typical smart way, decided that it was the investor that was the problem, not the bogus appraisals. So now I completely rehab a home, and can't sell it to maybe the person who needs a home in good shape the most. Just plain stupid. Maybe the government should run health care...sorry got off there...

[Captain Bill]

Originally Posted by oh2az2id

I buy and fix up homes for a living and have for some time, so I have been dealing with this before. You can not get a FHA loan on a home that has been owned less then 6 months. The 3 months your talking about is not right or the owner has only owned it 3 months and needs another 3 months to make it 6. You cant even have a FHA contract on it until the 6 month time period.
This was a new thing about 5 or 6 years ago. It happened when there was some shady appraisals and shady loans going on, so the government in its typical smart way, decided that it was the investor that was the problem, not the bogus appraisals. So now I completely rehab a home, and can't sell it to maybe the person who needs a home in good shape the most. Just plain stupid. Maybe the government should run health care...sorry got off there...

It may have been 6 months before. But now the FHA requires 90 day seasoning from the day your escrow closes to signing of a contract.

I just sold a rehabbed house and we had to wait until the 91 day to sign the contract.

If the price of the property has an increase from the purchase price, they may want two appraisals.

In this house, we put a lot of money in it, so there was a large price increase, and the assessor square footage was less than the actual (1500 vs 1743).

Because of this they required two appraisals. They threw the first one out because the appraiser had appraised the house within the past 6 months, probably for the bank that we bought it from. So they got a third appraisal, and all three appraised at my selling price, and the property square footage.

Fannie Mae and Freddie Mac, on the other hand require 6 month seasoning unless the down payment is 20%. The all have a set of guidelines that spell their conditions out.

We had a double whammy. We bought this REO from Fannie Mae, and they put a deed restriction on the maximum price we could sell the house for within 90 days. That was 90 days from their signed contract with me, until our selling close of escrow, which was not as restrictive as the FHA 90 day, but the price cap was unreasonable.

To buy a rehabbed home within the 90 day seasoning period requires the buyer to get a conventional loan and pay 20% down if its a Fannie Mae, or Freddie Mac, or find another conventional lender, usually a local bank or other lender that is not working under the Fannie and Freddie guidelines. There are plenty of them out there.

Up until this one, all of my rehabs have gone conventional with no seasoning issues.

[azkylady2]

Originally Posted by mike.main

Can someone explain to me why that's the case? (yet a VA loan qualifies).

I found a great house in Laveen that I really liked and I wanted to buy. Then I was told that it was flipped and there has to be a 3-month wait period before I can buy it using an FHA loan. I really hate that!

What's the lowest down payment they usually have for conventional loans?

Also, is there a PMI for an FHA loan?

Thanks for any help provided.

Mike.

The spirit of the program was to help first time home owners get into a home, not for FLIPPERS to make money off of. I am not mad, but actually glad theres rules to protect folks from just USEING the system.

[Rick Lee]

I don't understand anyone's problem with flippers. Do you complain when your stock price makes a sudden jump? Do you feel guilty for selling shortly after buying? I can't afford the money or headaches to rehab a house. I'm happy to pay market price for a move-in-ready place and couldn't care less about the seller's profit or motive. If he bought it for a song and fixed it up, good for both of us. The gov't. has no business trying to channel people's behavior through the tax code and other gov't. giveaways. Nothing wrong with taking advantage of any gov't. program you legally can, especially if you're one of the taxpayers paying for it.

[oh2az2id]

Thanks Cap bill, I stand corrected. I have not sold one thru FHA in years, and didnt even know it changed in 2006. I should have looked it up before opening my trap, sorry for the bad info. And reps for you...

[Captain Bill]

Originally Posted by azkylady2

The spirit of the program was to help first time home owners get into a home, not for FLIPPERS to make money off of. I am not mad, but actually glad theres rules to protect folks from just USEING the system.

When this market was going down hill, and neighborhoods were flooded with abandoned homes with unkempt yards, creating neighborhood blight, it was the investors who helped to clean it up.

These experienced real estate investors/rehabbers would buy these houses and clean them up and get them on the market so that end user buyers would buy them.

These rehabbers were about 40% of the buyers early on, and the bank owned homes they were buying were about 40% of the market. This was before the average homeowner even knew the meaning of REO or Short Sale.

If it weren't for the investor/rehabbers, those trashed and gutted homes with no yards would still be sitting there vacant and creating trashy neighborhoods. So don't go knocking those of us who have legitimate real estate investment businessess who are in the business of buying, rehabbing and selling homes for a profit. We were helping to beautify neighborhoods.

In addition, we began educating HOA's on how to put pressure on the banks to get these front yards cleaned up. In my community I noted every REO that had a bad yard, and reported it to the HOA. They would get the address of the bank, and begin sending fines to the bank, and those fines added up. Soon the banks wised up and began to hire clean up crews immediately so they wouldn't get more fines.

We take homes that no one can live in, and make them move-in ready for people who don't know how, and don't have the inclination to go in and rehab a gutted/trashed home.

We live in a free enterprise nation and everyone is free to determine what legitimate business they wish to be in. And every business goes into business for the purpose of making a profit.

It's unfortunate that the government though Fannie Mae, Freddie Mac, and the FHA don't understand the negative impact they place on these legitimate rehab businesses, and their buyers, by placing undue restrictions on the buying and selling.

They cost the buyers extra money. I just sold my rehabbed townhouse and because I sold it at 3 months for more than I paid for it, they required the buyer to get two appraisals, at $400 each. They threw the first one out because the appraiser had appraised the house within the past 6 months. How rediculous. So they required a third at another $400. All three came in at the same price, which was above my selling price.

I bought the property from Fannie Mae, and they placed an unreasonable deed restriction on the house that I could not sell it for more than $199k for 90 days. I needed to sell it at around $230 to make a profit.

That restriction was with no regard to my business overhead expenses; my dual closing costs (buying and selling costs) commissions to the selling agent; carrying costs of HOA fees, insurance, taxes, utilities, etc; and the direct cost of rehabbing the property. Yet they wanted to control the amount I could sell it for.

This cost me all of the extra holding costs, plus loss profit opportunity for having my funds tied up for 3 months. This is a completely unreasonable governmental control over a legitimate business.

[Captain Bill]

Originally Posted by oh2az2id

Thanks Cap bill, I stand corrected. I have not sold one thru FHA in years, and didnt even know it changed in 2006. I should have looked it up before opening my trap, sorry for the bad info. And reps for you...

You're welcome. I thought you may have mixed up the Fannie and Freddie guidelines with the FHA.

[TegaCayfamily]

Captain Bill, I am new to these forums but I have been reading over everything in this thread. We are trying to buy a house in Queen Creek and we are having a problem finding a bank that will do a conventional loan with 20% down on a house thats still within its 90 days of a seasonal clause. Do you know of a bank that we could contact for a mortgage?