Many people are using FHA loans these days. The FHA offers low government backed rates but has the problem of high mortgage insurance payments. FHA however offers guidelines that help people who have tighter budgets because they allow otherwise well qualified borrowers to exceed the standard debt to income ratios if other compensating factors exist.
This market has brought many home flippers into the fold.The large quantity of foreclosures that followed the market crash led to an abundance of investors flipping homes. The FHA has a rule loosely called the "Flip Rule" that requires at least 90 days of ownership before the sales contract is written. I think this is a stupid rule. Most of the homes that investors buy are houses that are too rough to be financed. They buy them for all cash and then make the improvements and repairs to bring the home up to market value. The FHA doesn't like to see a rapid price increase out of character with the rest of the market.
Many of these home flippers are professional companies that do a great job. There are probably some hacks out there as well, but for the most part, these companies provide a service to the community by rehabilitating otherwise dilapidated houses. My experience has been mostly positive when confronting these sellers with repairs after a home inspection. They tend to fix all the reasonable problems on an inspection report. Traditional sellers are often obstinate regarding repairs.
I think the FHA needs to re-visit this rule. The FHA is a loan program specifically designed to help entry level buyers and families get into homes and these "flipper" properties are often ideally suited for them.
Buyers looking at entry level homes may find a flipped property. Be sure to have your Real Estate professional check the closing date and write the offer after 90 days has passed. Your local agent should be aware of the better home flipping companies that operate and offer some guidance in this area.
P.S. There is a way to get an FHA loan approved on a less than 90 day old flipper. It requires a second appraisal and may require to seller to identify repairs that brought the house up in value. This can be tedious but a cooperative seller can make it happen. - Rod
