As many are not aware, there is/was an obscure requirement affecting FHA financed homes and seasoning. Simply put, an investor must have owned the home a minimum 90 days before conveying the home to a buyer with an FHA insured loan.
Not any more, well, at least temporarily.
Why is this a big deal? According to FHA Loan Pros, FHA purchases increased by 181% over 2007 to 2008 (pending statistics for 2009 still…). This is a HUGE majority of the market, and with incentives for the First Time Home Buyer Tax Credit – now is the time to sell.
The previous 90 day restriction, according to some, required that an FHA buyer not even enter into a purchase contract prior to the 90 days (this was one underwriter’s interpretation). My buyer had to wait until the 90 day time period has passed to write an offer and submit it to underwriting. I feel the underwriter was a bit rigid on this, and we could have looked elsewhere, but I found similar restrictions at several other banks. So we waited.
With the temporary reprieve on the seasoning rule, I look forward to showing my FHA buyers new flips on the market knowing we can successfully write offers and negotiate terms on the property without worry of seasoning requirements. I belive this will have a big impact on inventory and is a very WELCOME act of lieniency for investors who’s practices have been severely limited through current underwriting requirements and financing hurdles. Opening up the doors for investors to make money will move properties, create jobs and get us on the road to recovery.
I sincerely hope that down the road (hopefully soon) new lieniencies will be given to investors by means of underwriting. A recent quote I got for an investor cited 25% loan to value (not a big deal), but a 3 points up front for non-owner-occupied which I thought was crazy. This is a kind of market where if you can afford to buy another residence whether it be a rental, vacation property or land, you should (case in point, I just sold a bank owned vacation condo 2 bed 1 bath to a buyer for $39,000 — move in ready). Home buyers should not be nickeled and dimed for buying inventory and building their portfolio – just my opinion.
Over 2010 I predict the gates will open up slightly for investors and homebuyers. Bank policy (underwriting and investor backings) have affects on how fast inventory can move, I’m all about being rational and careful to prevent what we just went through the past 2-3 years. Money changing hands will bring us out and up!