The number of home flipping shows we see on cable TV these days really points to the popularity of real estate flipping. Changing your home can be the perfect way to grow your investment and even earn a living. However, there are some recent changes to the FHA home exchange laws that may affect the way you do business.

These new laws were created because there are also many scammers out there trying to scam anyone who invests in investments. There are an incredible number of people losing their homes these days. So much so that there are now some FHA rules in place to protect the market.

The new FHA home exchange laws are quite complicated to read, but here are the basics:

Property sold within 90 days of purchase will not be eligible for FHA mortgage financing using HUD insurance.
Those who sell a property within 91 and 180 days of purchase must record the resale value if it sells for more than the last purchase price.
If the property is sold within 91 days and 12 months of purchase, HUD may require additional documentation of the home’s market value.

With these new FHA rules, you will have some trouble finding buyers for your investment home. It basically means that you’ll need to find buyers for your home exchanges who don’t use FHA-backed loans. These rules are also commonly known as “seasoning issues.” You would have to hold the property for at least three months, or let it dry out, before you could sell it to a buyer with such financing.

There are only three exceptions to these rules. They are:

1. Sale of corporate housing purchased during the relocation of an employee
2. Sale of HUD-owned real property
3. Selling a new construction house

These exceptions generally do not apply to real estate home remodeling, except perhaps HUD property. However, there are many other buyers who use more conventional loans to buy a property.

Why create these rules?
In recent years, the US Department of Housing and Urban Development (HUD) noticed that there were quite a few homes in foreclosure. Most of these foreclosed homes were owned by low-income first-time homeowners who had government-backed loans from the FHA, VA, or Fannie Mae. All of these are loans protected by Principal Mortgage Insurance (PMI) provided by HUD.

When homeowners lost their homes to foreclosure, HUD ended up covering the rest of the mortgages through its government-backed insurance programs. HUD approved these FHA home exchange rules to protect these homeowners and themselves from losing money. You can see the rule in a document called ‘Prohibition of Transfer of Ownership in HUD Single Family Mortgage Insurance Programs; ultimate rule; 24 CFR Part 203, doc. No. FR-4615-F-02.’ You can usually get them from the government’s federal registration site.

Tips for dealing with Seasoning:

Sell ​​non-conforming loans to buyers. There are still many other mortgages that do not require or use PMI. These are conventional loans made to buyers who can make large down payments and are more likely to buy a very nice remodeled home anyway.
Document all costs and profits. Save all your receipts and create a personal record of who you paid what and improvements made to each property.
Lease with option to buy your house flips. FHA home exchange rules only apply to recently purchased homes. Let the buyer rent-own the property and you’ll avoid the hassle of preparation altogether. Since the homeowner will not be applying for a mortgage to liquidate the property; You don’t have to worry about being denied because the property was recently purchased.

There are still plenty of ways to flip a house, even with these new rules for flipping houses. These rules help wholesale investors and HUD by helping buyers keep their homes when they get a mortgage.