March 8, 2016
The FHA Single Family Mortgage Loan program is regulated by the rules published in HUD 4000.1. These rules cover everything from appraisal requirements and FICO score minimums to Fair Housing requirements and responsibilities.
HUD 4000.1 also establishes requirements for the home loan transaction–for example, did you know FHA mortgage loan rules have specific parameters for who can sell the property to the borrower purchasing with an FHA mortgage?
HUD 4000.1 clearly states:
“To be eligible for a mortgage insured by FHA, a Property must be purchased from the owner of record. The transaction may not involve any sale or assignment of the sales contract.” How is the lender required to establish that the seller is the owner of record? FHA loan rules say the lender must, “obtain documentation verifying that the seller is the owner of record”.
That documentation may include a property sales history report, a copy of the recorded deed from the seller or what HUD 4000.1 describes as “other documentation, such as a copy of a property tax bill, title commitment, or binder, demonstrating the sellers ownership of the Property and the date it was acquired.”
This requirement applies to all FHA purchase money Mortgages, regardless of the time between resales, according to HUD 4000.1.
There are also restrictions on “flipping” properties. “Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit with an artificially inflated value, often abetted by a Mortgagees collusion with an Appraiser.” The FHA loan rules in this area specifically define flipping as ” the purchase and subsequent resale of a Property in a short period of time”.
HUD 4000.1 has rules to circumvent this, stating, “A Property that is being resold 90 Days or fewer following the sellers date of acquisition is not eligible for an FHA-insured Mortgage”.
There are exceptions. According to the FHA/HUD official site, those exceptions include, but are not limited to, the following:
–Properties acquired by an employer or relocation agency in connection with the relocation of an employee;
–resales by HUD under its REO program;
–sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
–sales of Properties by nonprofits approved to purchase HUD owned Single Family Properties at a discount with resale restrictions
We will examine the flipping issue in greater detail in a future blog post.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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