FHA Rules For Flipped Houses

Flipping houses has become increasingly popular in the last 5-10 years. Many are familiar with the term and often associate it with popular HGTV shows. But did you know that there are FHA rules for flipped houses? These rules are primarily in place to ensure a property isn’t being sold from person to person to drive up the property value with little to no updates on the home.

The FHA rules for flipped houses are divided into two sections and have differing restrictions for each. The timeline begins the day the seller closed on the home and ends on the date the purchase contract is created.

If a house has been flipped in less than 90 days…

If a property was bought, flipped, and sold in less than 90 days, buyers cannot use an FHA loan to purchase the home.

If a house has been flipped in 91-180 days…

If a house was bought, flipped, and sold between 91-180 days, buyers can use an FHA loan to purchase the home but a second appraisal on the property is required if the home is being sold for more than 100% the original purchase price. Moreso, the buyer cannot pay for the second appraisal.

You Might Also Like: Sellers Don’t Like FHA Loans

For example, let’s say the current seller bought the home on January 15 for $115,000 and is selling it for $245,000. If the contract for the new buyer is executed prior to April 15, it is not eligible for FHA financing. If the contract is executed between April 15 and July 15, FHA financing can be used but a second appraisal would be required. Also, if the contract was any time after April 15 and the sales price was $215,000 (87% increase) instead of $245,000, a second appraisal wouldn’t be needed.

How To Spot A Flipped House

The easiest way to tell if a house has been flipped is by looking at the property history. Transaction records are available through your county assessor’s office. A good rule of thumb is that if the house was bought within the past year, it has most likely been flipped.

Still have questions about the FHA rules for flipped houses? Give us a call at (402) 991-5153 and we’ll do our best to answer all of your questions.

Ready to start the homebuying process? Our online application takes anywhere from 5-20 minutes to complete and we can have you pre-approved for a loan in just a few hours.