FHA Waives 90 Day Rule for Investors Who Renovate and Sell

Properties purchased for renovation or repair by investors for resale were not eligible for FHA loans until 90 days after the purchase. As of February 1, that’s changing. The FHA is waiving the 90 day period for one year, starting February 1st, to allow investors to renovate or repair REO (real estate owned) and foreclosed properties and quickly resell them using FHA financing.

With FHA financing making up about 30% of all mortgage written today, we believe it’s important to keep you informed of changes as they occur. FHA loans are very attractive to both buyers because of lower down payment, credit requirements and closing costs, and to lenders because of government guarantees.

The FHA has been very active lately with rule changes and we’ve had a lot to report. Just a few days ago we reported on FHA Loan Changes that will make loans more expensive, especially for those with a FICO score under 580. Now, we see the FHA making more properties eligible for FHA financing.

There are also separate FHA Condo Financing Rules that restrict sales in many condo buildings, and new FHA Short Sale Polcies.

The bottom line to this change is that if you are an investor who is buying property for resale, the FHA has made it easier for you to sell the property by allowing buyers to use FHA financing without a waiting period. There are of course restrictions:

1. Only Arms length transactions are eligible. There can be no interest between buyers, sellers and others.
2. If the selling price is 20 percent or greater that the seller’s purchase price, documentation will be required by lenders  to justify the price. A new appraisal will probably be required to support the higher price.
3. An independent property inspection will also need to be provided by lenders to buyers before closing.

Will FHA Loan Changes Help Daytona Beach?

Will this change to FHA loan requirements for investors help Daytona Beach homes for sale? It certainly can’t hurt and may help move some of the REO and forclosed properties that have been damaged and need extensive repairs to sell. Investors can get a quicker turn-around, saving them money and making it more attractive to purchase and renovate or repair.