90 Day Anti-Flipping Rule: Can you finance FHA before the 90 days?

90 Day FHA Anti-Flipping Rule: Can you finance FHA before the 90 days?

You're going to love the information on this post. I do not mean to kick the dead horse while it is being buried but my previous post on the 90 Day FHA Anti-Flipping rule generated 4300+ hits, so of course I stopped kicking the horse and went to the next farm to milk the cow. Obviously you know this is a hot topic in our industry and we are always hoping the rule just goes away. However, it will not. The important thing here is to understand it, embrace it and work with the lemons that are handed to us. OK OK!! I will tell you what this post is about already.

In regards to the FHA 90 Day Anti-Flipping Rule, FHA is mainly concerned with the date in which the sale has been bonafide NOT the recording date. However, I will put the disclaimer on this statement. Most banks do not intepret the rule for what it is. Based on FHA's interpretation, some lenders will indeed allow the loan to fund with an FHA loan. However, most banks' internal policies do not allow this to occur, they instead base their decision on the recording date not the SETTLEMENT DATE.

"If the owner sells a property within 90 days after the date of acquisition, that property is not eligible security for a mortgage insured by FHA unless it falls within one of the exceptions to the time restrictions on resales set forth in §203.37a(c) of the regulations. FHA defines the seller's date of acquisition as the date of settlement on the seller's purchase of that property. The resale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA."

If this does not make sense, allow me to break it down for you:

Typical Scenario:

1. Investor buys property and sale is executed on September 2nd (Settlement Date)
2. Deed/ Title is recorded on September 30th
3. Seller writes contract on December 3rd and attempts to close the transaction on December 15th and gets stuck due to the lender not allowing the sale (ie: sale date is not January 1st)

The way the rule actually works:

1. Investor buys property and sale is executed on September 2nd (Settlement Date)
2. Deed/ Title is recorded on September 30th
3. Seller writes contract on December 3rd (91 Days after settlement) and closes the transaction on December 15th per FHA guidelines NOT January 1st (which most lenders will limit you to).
4. SOLD!!

If you have any questions or interested in learning if your or your client's property fit into this box, contact me to review.