FHA Loan

If you are an Inland Empire home buyer looking for a house that is in turn key condition and ready to move in, a recently flipped property can be the perfect match for you!!!

Purchasing a flipped property in San Bernardino and Riverside counties just got easier.  The guideline that prevents an investor from selling a recently purchased home within 90 days after the initial purchase; where the sales price has increased more than 20% has been waived.  This change in guidelines will be huge for those looking to purchase a flipped property while interest rates are at 50 year lows.

But there are some rules to protect the public from unscrupulous investors.  Prior to January 15, 2010, FHA had an anti-flipping policy that prevented an owner to sell their property within 90 days after the initial purchase of the home. In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, this rule has been waived.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” HUD Secretary Shaun Donovan said.

Not every lender in California have the same set of guidelines, some may be more restrictive and qualifying more difficult.  In some situations, a lender may require a full 90 days waiting period after the investor purchased the house before the house can be resold.  It is imperative for all parties to know the guidelines prior to making any offer on an investor owned house.  Here are just a few of the guidelines that need to be considered prior to any offer:

FHA Guidelines

• If the property value has increased from the prior sales by more that 20%, a second full appraisal is needed.  The buyer cannot pay for the second appraisal.  In addition to the 2 appraisals, a property inspection will also be required.  The property inspector must have no interest in the property or relationship with the seller.
• The minimum credit score is 680.
• The buyer must have a minimum of 3 months PITI of reserves, retirement accounts may be used to meet this requirement.
• All buyers must have a minimum 3 years continuous employment history; no gaps of employemnt are allowed.
• All transactions must be arms-length; no identity of interest between buyer, property seller or third parties.  Specific ways to ensure an arms-length transaction include:
  • Property seller currently holds title to the property.
  • LLCs, corporations or trusts serving as property sellers must meet all applicable state and federal law.
  • No pattern or previous flipping activity exists on the property (as evidenced by multiple title transfers within the past 12 months)
  • The property was marketed openly and fairly (any sales contracts with “assignment of contract of sale” may be a red flag).

There are still investors trying to take advantage of a housing weary public.  If you have any questions or concerns about the property you are looking to buy, contact me or your trusted real estate advisor.

In the majority of cases, VA loans do not allow for money back at closing to cover home repairs.

If you are purchasing your new home in Rhode Island and if the appraisal calls for repairs to be made, either the seller or buyer will have to pay for these repairs. The one exception to this rule is if you use an energy-efficient VA mortgage for home improvements.

Some examples of VA approved energy-efficient home improvement mortgage include but are not limited to:

Solar heating/cooling

Improved weather stripping

Upgrades for furnaces

New thermostats

Added home insulation

New energy-efficient doors and windows

**It should be noted that the Veteran Administration does limit the amount of money you can borrow for energy-efficient home improvements to a maximum of $6,000 above your VA loan amount.

There are also requirements you must follow for providing documentation to have your improvements included in your VA loan:

For improvements up to $3,000:

• A copy of a quote from a contractor listing the improvements and the associated expenses. This quote has to name the model numbers and item names set for installation and the quote must contain signatures and dates signed for the contractor and the veteran borrower.

• For each of the items to be installed, you must provide documentation from the manufacturer that details the cost, item names, and model numbers.

For improvements between $3,000-6,000:

• A copy of a quote from a contractor listing the improvements and the associated expenses. This quote has to name the model numbers and item names set for installation and the quote must contain signatures and dates signed for the contractor and the veteran borrower.

• For each of the items to be installed, you must provide documentation from the manufacturer that details the cost, item names, and model numbers.

• Either your utility company or someone else has to perform an energy assessment of your home. This assessment must detail your average monthly utility costs are for the previous 12 months.

By following this procedure you can take full advantage of your military benefits and receive money back at closing for money saving home improvements.

To learn more on this topic contact your Rhode Island VA Mortgage Specialist today. 

Lynda Mckenzie
Mortgage Master, Inc.
RI license#137627/NMLS#137627
Direct:  401-524-9796
E-mail:  lmckenzie@mortgagemasterinc.com
Web:      http://www.mortgagemasterinc.com/lmckenzie
 RI Loan Broker 95000655LBB01 / RI Lender License 2005 1876LLB01