New Mortgage Rules – More Restrictions, Full Disclosure & Increased Holding Costs
Flipping Properties and FHA
We are seeing a lot more foreclosed properties that have been purchased by investors and rehabbed.
If your client is buying one of these properties – and if they are using FHA financing there are some restrictions:
- Only owners of record may sell properties that will be insured by FHA financing.
- Must be a minimum of 91 days between date that prior purchase was settled and the date your client first signed a contract offer. Not Ratification Date. Date the contract was first signed by your client.
- From 91 to 180 Days: If the new purchase price is higher than the prior purchase price we may need a 2nd appraisal to establish value.
Seasoning Requirements for Cash-Out Refinance
When buying a property with the intent to upgrade or rehab that property – and their intent is to then do a Cash-Out Refinance to re-coup money spent on the rehab.
- There is now a 6 month seasoning requirement (Freddie Mac and Fannie Mae) on all Cash-Out Refinances
- That would be 6 months from the purchase date or last refinance.
4506-T: Request for Transcript of Tax Return
Borrower’s sign a 4506-T at closing to allow their tax transcripts to be requested for Quality Control purposes. Bulletin came out today – Effective with loan applications dated on or after November 5th. Sign at application, not closing – and immediately request transcripts of 1040, W2s, and 1099s.
Information provided by Aimee Waltz with SunTrust Mortgage