Buying a Flipped House Using an FHA Mortgage? Better Do Your Homework

I received a question yesterday from Kevin Curtis – Real Estate Agent at Minnesota Properties – regarding the real estate title seasoning rule for FHA mortgage financing. Specifically, the question pertained to the time a house “flipper” is required to wait in order to sell a home to a buyer using an FHA mortgage.

Based on the latest data from the FHA via Handbook Section 4155-2.4.7 entitled Prohibition on Property Flipping, the FHA rule plays out like this:

FHA Rule on Financing Flipped Property

If a property is re-sold 90 days or less following the date a seller takes possession of title, the property is not eligible for a mortgage insured by FHA.

FHA defines the Seller’s Date of Acquisition and the Re-Sale Date as follows:

Seller’s date of acquisition: the date of settlement on the seller’s purchase of that property, and
Re-sale date: the date of execution of the sales contract by a buyer intending to finance the property with an FHA-insured loan.

The only exceptions to the 90 day resale restriction described in HUD 4155.2 4.7.e are for

properties acquired by an employer or relocation agency in connection with the relocation of an employee
re-sales by HUD under its Real Estate Owned (REO) program
sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies
sales of properties by nonprofits approved to purchase HUD owned single family properties at a discount with resale restrictions
sales of properties that are acquired by the seller by inheritance
sales of properties by state and federally-chartered financial institutions and government sponsored enterprises
sales of properties by local and state government agencies, and
sales of properties within Presidentially Declared Disaster Areas.

Any subsequent re-sales of the properties described above must meet the 90 day threshold in order for the mortgage to be eligible as security for FHA insurance.

Thanks to Kevin Curtis for asking this question. With home prices so low on houses that most definitely qualify on handyman specials – this FHA 90 day rule on insuring flipped houses is something for folks to remember if they plan to use FHA financing.

I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage loan originator, I’m your guy. Call me at 888-859-7418 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!

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