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FHA Extends 90-Day Seasoning Waiver

What is seasoning? It is the time frame between legal owners of a particular property in this case. For example if a home was purchased on March 1st and sold on March 31st…it would only have been seasoned for 30 days.

The rules around how lender see this when providing a new loan for a buyer have been changing as fast as the rest of the lending guidelines. On January 28, 2011 HUD came out with clarification regarding the “seasoning” rules.

According to Lowell Lilley at Suburban Mortgage:

“On Friday, January 28, 2011 HUD announced the extension of the 90-day seasoning waiver.

Here are the 4 things you need to know about this waiver:

1. The extension is effective for all sales contracts executed on or after 2/1/11 through 12/31/11, unless otherwise extended or withdrawn by FHA.

2. All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. The following may be grounds for denial of the file if deemed to circumvent the arms-length rule:

A. Seller on contract does not hold title to property

B. Property is being sold by an LLC, trust, or corporation

C. A pattern of flipping exists with subject property within last 12 months, and

D. Property was not marketed openly and fairly.

3. In cases where the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender follows these criteria:

A. Justify the increase with supporting documentation and/or a second appraisal

B. Provide a home inspection report to the borrower (borrower can be charged)

1. Inspector can only be paid by the lender

2. Inspector cannot have an interest in the property or a relationship with the seller

3. Inspector cannot pay a referral fee

4. Inspector cannot receive payment for recommending a contractor for repairs

4. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program”

What is this really saying? If you are an investor considering buying a home and reselling it for a profit…commonly referred to as “flipping”…make sure you and your agent are familiar with the “rules” and and are comfortable holding the property if necessary for over 90 days…and be willing to provide reciepts for repairs and improvements if requested.

There are A LOT of great deals out there folks…I just want my investor clients to be informed to help them make wise decisions when acquiring residential property they are looking to flip.

As always… if you are looking for a GREAT agent to help with your real estate needs please e-mail me at or give me a call (or text) at 602-504-3898 or 888-897-7821 x 114. Plus, I have a GREAT search tool on my web site that gives you the ability to search the entire MLS…just like agents do. Very COOL! ;) Go to Metro Phoenix Homes and check it out! YOU can create and save as many searches as you would like…and it is THE SAME SEARCH I DO AS AN AGENT! You will LOVE it!


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