On December 31, the FHA announced that the property flipping waiver had expired. The waiver prohibited the use of FHA financing on the purchase of a single-family property that was resold within 90 days of the previous acquisition. So now that the waiver has been expired, what does this mean for first-time homebuyers?
I sought out the professional opinion of Chad Trease, Senior Loan Officer at Prime Lending. “Now that the 90 day waiver has gone away,” explains Chad, “it is going to be hard to buy a house that was recently flipped.” He explained that any home that has been flipped will not be eligible for FHA financing until its 91st day.
Is this a problem? According to Chad, probably not. “Most flips take longer than 90 days,” he explains. The reason for this action from the FHA is to do away with people who purchase a home, do little to no work on it, and try to sell the property for even more money right away.
First-time homebuyers need to be aware of this change, especially when out in the market looking to purchase a home. First-time homebuyers should also be aware that although you cannot use an FHA loan until after 90 days, you can use a conventional loan.
Almost anyone qualifies for an FHA loan, however, you are only allowed to have one at a time. FHA loans typically have very expensive mortgage insurance that never drops off the loan. According to Chad, an FHA loan is ideal for homebuyers who are credit challenged. In other words, it’s somewhat of a last resort. Conventional loans, on the other hand, are for first-time homebuyers who have not owned property in the prior 3 years. Conventional loans have a lesser down payment and have a cheaper mortgage insurance that drops off once you reach 20% of the property.
First-time homebuyers, keep in mind that it is not common for a homebuyer to purchase a flipped home before the 90-day timeline. As mentioned before, most flipped houses take longer than 90 days to complete. However, if you have further questions or concerns, contact me and we can talk through the details.