This is a popular question lately. NO THEY DO NOT. But you have to be careful as to the transaction on who is involved and the increase of sales price. What does that mean? If the underwriter determines that title did change during that prescribed period of time via a non arms-length transaction, that could spell trouble. Also there is a greater possibility of a review appraisal being done by the lender very close to close of escrow, which could stop a deal in its tracks.

 

The 90 day hold rule imposed by FHA means that for a borrower to obtain an FHA loan to buy a house, the FHA lender must be certain that title did not transfer on the proeprty within 90 days, or that there has not been a significant increase in price via any transfer after 90 days. Case in point. Buyer bought a house for $129,000 in December. Did $18,000 worth of work and put it on the market. Received a contract 107 days after they took title, so well past the 90 days. Everythings OK, right? Well, maybe not. They accpeted a contract for $185,000, which the current comparables support, but the FHA underwriter, just before closing, killed the deal, and said in a soft or declining market, the price escalation was excessive.

 

Lesson learned? Short flips of title or excessive value increases will almost certainly fail the underwriters approval.

 

Credit for the content to Mike Neill American Alliance Mortgage Company
480-505-2202 x 208  E-Mail: mike@aamcbank.com