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FHA Approves New 90 Day Rule

Posted by Greg Moser on January 18, 2015
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In a surprising announcement Friday, HUD Secretary’s Shaun Donovan announced HUD will now insure FHA home loans on properties that have been owned for less than 90 days by the seller.

This policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices aren’t allowed,” Donovan said.  This policy will take effect February 1, 2010, and last for one year.

This is the one of the biggest changes HUD/FHA has made to enable home ownership, especially for first time buyers, since offering FHA loans with only 1/2% Down Payment (99.5% LTV FHA loans).

Until now, people using an FHA loan to finance the purchase of a home could not make an offer on a home that has been owned for less than 90 days by the seller.  They had to wait until the 91st day to make an offer.

The only way to finance a home purchase with-in the 90 day period were limited to using Conventional, VA, or private financing.  This policy change will bring more competition (more offers) to homes being resold by investors/flippers and allow more buyers using FHA loans to get an offer accepted.

Here are the conditions to this new policy:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.