FHA Flips – How do They Work?

Arizona FHA Flip Loan

DOING AN FHA “FLIP” LOAN IN AZ – HOW IT DIFFERS
In the past, FHA has not allowed Arizona (or any state’s) borrowers using an FHA mortgage to purchase flips.  That has changed!  HUD/FHA now allow FHA buyers to purchase “flipped” properties which is great becuase many homes on the Phoenix area Real Estate market are flips!

WHAT IS AN ARIZONA “FHA FLIP?”
HUD and FHA define a “flip” as a property that is being resold by an investor within 90 days of the date that they purchased the property.  Check this link out to read more about how and why FHA is allowing FHA Flip PurchasesFLIPS.   You can also visit HUD/FHA’s main site HERE. Many investors in our local Arizona market are buying, fixing and flipping properties.

HOW DOES HUD/FHA CALCULATE THE 90 DAY TIMEFRAME?
The 90 day timeframe is measured starting on the date that the Arizona home investor settled on their Phoenix area purchase (not the date that their purchase recorded) through the date that a new Arizona FHA buyer executes a purchase contract to buy the property from the investor.  As your Phoenix Arizona FHA mortgage lender, we need to clearly document the settlement date to FHA when underwriting and approving the buyers FHA loan.

WHAT IS DIFFERENT ABOUT FLIP AND A NON FLIP PURCHASE IN ARIZONA?
If the price the new Arizona FHA buyer is paying is less than or equal to 120% of the price the investor paid nothing is different.  However, if the buyer is purchasing the house for more than 120% compared to what the Arizona investor paid  there are a few key differences between that type of an FHA flip and an FHA non-flip purchase.
120% calculation example: Investor buys a home for $100,000 and sells for $125,000 – the new buyers price = 125% of the
investors price and therefore the new transaction is subject to a few additional FHA mortgage guidelines

ADDITIONAL LENDER GUIDELINES FO FHA FLIP TRANSACTION WHEN SALES PRICE EXCEEDS 120% CAP:
1. When an Phoenix area FHA buyer is purchasing a home that has a purchase price greater than 120% of what the  investor/seller paid for it, 2 FHA appraisals are required (the buyer cannot pay for the 2nd appraisal).  The loan amount will be based on the lower of the two values contained within the two FHA appraisals.

2. The buyer must also obtain a HUD approved home inspection from an Arizona licensed home inspector.  Any safety, soundness or security issues noted in the inspection report (or in the 2 required appraisals) must be fixed prior to closing (see FHA Property Requirements for further explanation).  Please note that the buyer does not need to have every single item that a home inspector points out on a conventional home inspection report fixed.   Typically, we have a Phoenix area based FHA approved inspector complete a slightly different HUD approved version of a home inspection report.  This is usually done in addition to the normal home inspection that the buyer had completed if they in fact decided to have a conventional home inspection completed.  The reason for the extra work and the additional inspection report is that an FHA trained inspector knows what FHA requires and what they do not.  Their streamlined FHA report is much simpler based solely on the fact that it is not as extensive and in depth as a traditional inspection report.  If a tradtional report is submitted with the loan file for full approval,  an FHA underwriter would require that the repairs on the traditional report be completed prior to closing.  Again, a traditional report typically has a much more extensive list of repairs than the streamlined FHA/HUD inspection report.

If you have any other questions regarding FHA flips please do not hesitate to contact me.  My team and I specialize in financing FHA flips.

This short video below will also help you understand how flips work!


Click HERE to apply for an FHA loan today!  You can call or email me anytime too!

Jeremy

PHOENIX ARIZONA FHA MORTGAGE LENDER

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Jeremy is the Founder of The HOUSE Team and a Sr. Loan Officer/Branch Manager with PrimeLending. Over the past several years he has ranked in the top 1% of all loan officers nationwide and one of the top 200 loan officers in America. In the mortgage industry, the devil is in the details. Jeremy prides himself on being a student and an expert when it comes to everything mortgage related.

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  1. […] let me know if we can help! By the way, HERE  is a link to a recent post on FHA Flips in case you have any questions. Thank […]

  2. […] click HERE for more info on the special guidelines that an FHA buyer must meet when purchasing a property from […]

  3. […] We offer FHA financing on flipped properties – for more detail on FHA flips click HERE […]

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