You’ve searched for the perfect home for what seems like an eternity. Your Real Estate Agent has shown you so many homes, in Phoenix, that you lost count. She calls you up and says, “I found the perfect home; it has a big backyard, 3 car garage, 5 bedrooms and the location is exactly where you want to be.” You’re so excited you grab the kids, jump in the car, and drive over.
It’s absolutely perfect!! The family loves it, the kids are running around the backyard, your wife can picture her clothes in the master closet, and you see yourself working on your toys in the 3 car garage. You rush to write an offer on the home because you know, in Phoenix, there are multiple offers on everything in this price range. It’s so perfect that you’re even willing to pay more than the list price just to secure the home. The seller accepts your offer, calls your Realtor, and gives them the bad news. Wait!!! The bad news??? The seller bought this home only 7 days ago, and has now re-listed it for $29,000 more than he paid for it. The property is what is known as a “flipped house” in the Phoenix real estate market. He tells your Realtor that you need to make sure your lender can secure a mortgage on the property, since he just bought it. No problem, right?
Your lender originally prequalified you for an FHA loan with a low 3.5% down payment. You call your lender and he tells you, “I’m sorry we can’t do an FHA loan because of the 90-day rule.” Your confused. What is the 90-day rule? You look on the Internet and find that HUD’s 90-day rule states any re-sales occurring 90 days or less following the acquisition will not be eligible for a mortgage to be insured by FHA. FHA’s analysis disclosed that among the most egregious examples of predatory lending was on “flips” that occurred within a very brief time span, often within a matter of days. Thus, the “quick flips” were eliminated for at least 90 days. No FHA loan for you.
Your not worried because your lender is a very smart guy, he’s a Senior Loan Officer. He says, “Don’t worry, we will just do a conventional loan.” Since you have enough to put down 10% for a conventional loan, you think your problem is solved. Your lender is a genius. You start packing all of your belongings into boxes, ordering utilties for the new house and getting ready for the “big” move.
A few weeks go by and your lender calls you and says, “We have a major problem.” Your loan was declined because the mortgage insurance company won’t issue a mortgage insurance certificate because the property is being “flipped.” Oh and by the way, even if you can put down 20% to avoid mortgage insurance we still can’t do your loan. You say, “Huh???” “You can’t do the loan?” That’s right, he can’t do the loan because of new guidelines by most major lenders that won’t allow financing on flipped properties. What are you going to do now??
Your Realtor is very sharp, experienced and is determined to get this home for you. She has called four different mortgage companies. Luckily, one of the lenders she talks to also has a good network and he refers her to another lender. We can still do your loan with conventional financing, even if the property is “flipped”. There is no specific time frame required for conforming conventional seasoning on a purchase transaction. However, the appraiser must provide a 12-month listing history for the property. Frequent listings and/or sales also require explanation on each occurrence or listing and should include the data source(s), offering prices, date(s), and any further evaluation as they may indicate “flipping”.
Closing day comes and you finally get the keys to your house. You’re so excited that you tell everyone you know, who is looking to purchase a home in Phoenix, to call your Realtor and their new “preferred” Mortgage Consultant. Life is good.Questions? Contact David Krushinsky Today!