Let’s face it. Some of the duplexes and single family homes on the market right now are a little, uh…skanky.
Some of you are thinking, so? With a FHA 203k construction loan , a little professional help and some sweat equity, you’re good to go.
But what if you’re not an HGTV addict who’s convinced you can fix it all yourself?
If you’re lucky, you’ll stumble into a property that an investor has purchased, rehabbed and made move-in ready.
Of course, the tradeoff is the investor wants to earn a profit. That’s perfectly fair. However, it may also stop you from getting an FHA insured loan.
See, even though FHA suspended it’s anti-flipping rule through February 1, 2011, many FHA insured investors aren’t willing to lend on properties a seller has owned for less than 90 days and, or, has been marked up more than 20 percent from its purchase price.
Until recently, there had been some exceptions. A handful of banks were willing to offer a mortgage on a rehabbed duplex, provided the seller could produce ample documentation of the costs of the repairs and improvements they’d made.
Don’t panic. There is a relatively easy remedy for this.
The rule was established to prevent fraudulent flippping.
Basically, someone would buy a house, do some minor cosmetic changes, then resell it to someone for an enormous profit. Usually the latter was in on the scheme, and would quickly default on the loan. This resulted in a foreclosure and a fraudulent loan.
For some reason, lenders seem to believe that after someone has owned a property 91 days, fraud is no longer a probability. I haven’t a clue why 90 days is the magic number, but it is.
So the simple solution to buying that cute, well-renovated duplex is this; make sure the date on the purchase agreement you give that rehabber is dated at least 91 days after the date they closed on the property.