More changes on the way for first-time home buyers!
Are you in the market for a new home? Perhaps you have been out looking at one of the many ‘updated’ properties on the market. As a first-time buyer searching for a nice ‘entry-level’ starter home, this latest FHA loan change could affect you…if you are interested in a flip property.
What is a ‘FLIP’ you ask? In simple terms it’s when an investor purchases a home that is below market because of unique situations and cleans or improves the property with the intention to resell it for a profit. Approx. 13.8% of our local housing inventory consists of ‘flip’ properties.
On Thursday of last week, lenders were notified by the Federal Housing Administration’s (FHA) Office of Single Family Housing that the temporary ‘waiver’ of FHA’s regulation that prohibits the use of FHA financing to purchase single family properties that are resold within 90 days of the previous acquisition, expires on December 31, 2014.
The waiver applies to all sales contracts executed on or after February 1, 2010, until 11:59 p.m., December 31, 2014. FHA deems a sales contract to be executed when all parties to the contract have signed the contract, and the contract is enforceable under the law of the state the property is located. Mortgages that are made on properties in which sales contracts have been executed after 11:59 p.m., December 31, 2014, are not eligible for a waiver of the regulation prohibiting property flipping. FHA will not extend the waiver beyond December 31, 2014.
There are some exceptions to this change, as stated in Section 203.37a (c).
The following is exempt: The exempt transactions include sales by HUD of real estate-owned, (REO) properties under HUD’s regulations in 24 CFR part 291, sales by other federal agencies of REO properties, sales of properties by nonprofit organizations that have been approved to purchase and resell HUD REO properties, sales by the state- federally chartered financial institutions and government sponsored enterprises (GSEs), and, upon announcement by HUD through issuance of notice, sales of properties in areas designated by the President as federal disaster areas. The regulation, including its exemptions, is still in effect.
Of course, as a first-time buyer interested in a ‘traditional sale,’ FHA is still a great loan program. Remember, the latest change only delays the waiting period (90 days) on a flipped property. (Most FHA loan programs can close within 30 days.)
On the positive side of this, if you qualify for a VA loan or Conventional financing, the FHA change will not affect you.
Speaking with Kathy King at Ability mortgage, she explained that the recent changes in Conventional financing are really exciting for our local market. The most recent change allows borrowers to finance 97% with only a 3% down payment. This program has the attention of many local buyers because while FHA financing only allowed a cap of (approx.) $276,000. in Stanislaus County, Conventional loan limits allow $417,000.
For more information on the above loan topics, please contact Kathy King at ability Mortgage (209) 603-8503.