FHA Flip Guideline Changes

The Financing Flip Requires Preperation

Last week the guidelines for FHA flips were revised.  With that update came numerous questions about the flip guidelines for Conventional loans.  First of all – lets  address a question on flip properties

Q: What date do you use to determine if a property is a flip or not?  The date the Deed was recorded or the auction date?

A: Some underwriters use the auction date when the recorded instrument is a Trustee Deed.  Some banks use the date the deed is recorded – this is an important question to ask upfront.

Conventional financing on a Primary Home with a  credit score as low as 660 with 5% down is available.

Conventional mortgage insurance companies requirements on  a flip purchase to:

1. Seller must be owner of record
2. No back-to-back, simultaneous closings, or double closings are allowed
3. Increases in the property value must be explained, documented and supported by an appraisal AND
4. Improvements and renovations must be substantiated with receipts, contractor invoices, building permits or other documentation and reflected by the appraiser

Conventional loans do not require 2 appraisals like FHA. However it is a good idea to perform the two following actions

1. The lender must obtain receipts for improvements from the listing agent or seller ASAP to provide the appraiser before the appraisal is completed
2. The appraiser is required to note that improvements he/she has receipts for were completed and the increase in value is supported.