With current FHA loan guidelines, a borrower cannot qualify for a FHA loan unless that property has been owned by the seller for more than 90 days. So if an investor buys a property and fixes it up, they have to wait until the 91st day after they took ownership to go into contract with a FHA buyer. But now FHA has changed this rule and there is now no time limit a seller must have owned a property to qualify FHA loan.
This is a very good change for getting FHA loans in California and being able to get your purchase offer accepted. Many sellers were choosing to accept purchase offers with conventional loan vs FHA because of this rule. There are many investors in California that are purchasing properties at foreclosure trustee sales for cash and fixing them up to sell on the market. This represents a lot of the inventory available in the market right now. This rule change will help FHA borrowers be competitive against buyers making all cash offers and conventional loan offers.
This rule change takes affect February 1st 2010. FHA still will have some rules around flipping properties such as:
- All transactions with seller owing less than 90 days must be arms-length. No indentity of interest between buyer and seller or other parties participating in the transaction
- In cases where the sales price is 20% above the sellers original acquisition price and the seller purchased less than 90 days ago, the property must meet specific conditions
This rule change you help buyers out there be much more competitive to get an FHA home loan in California.
Some other great highlights of FHA loans in California below:
- Maximum FHA loan in many parts of California is $729,750
- FHA loan approval with up to 56% back end debt-to-income ratios (conventional loans with <20% down have a 41% max debt-to-income ratio)
- FHA loan interest rates fixed for 30 years STILL at historic lows
- FHA loan credit score does not have to be perfect
- FHA loan down payment is only 3.5% and that can be a gift from a relative (conventional minimum down is mostly 10% and you need a 720 credit score and 41% debt ratio)
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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