Can you buy a house with an FHA Loan and Flip it?

Asked by Jordan Kraushar, Sacramento, CA Thu Aug 18, 2011

I know they say you have to occupy the house for a year before you sell it. I have also heard that if you pay 4 months payments they will let you sell the house. I know this isnt something that you can keep doing over and over, but do you think one time would work? In your opinion what is the best loan program for flipping that has a low down payment? Thanks!

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Merritt Noel, , Denver, CO
Thu Aug 18, 2011
FHA and house flipping is a very slippery slope. I would not touch that with a 10 foot pole. You are talking about a federally insured home loan. If you want to commit a federal crime and end up wearing a yellow jump suit fo right ahead. Fixing and flipping is very difficult if you do not have the funds available for down payment. I would think that your only options is to look at hard money for both the home loan and down payment to meet the hard money lender LTV requirements. Otherwise you are looking at typical conventional financing that require 20% on investment purchase.
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WRONG WRONG WRONG. It's not against the law whatsoever. There are no prepayment penalties on FHA loans, ever. Yes, it is supposed to be a primary residence and the bank won't be happy if you flip right away as commission recapture could take place. You can also buy conforming investment properties with 10% down, not 20%. 203K and Homestyle loans give you the money for renovation, so you don't need it upfront. So pretty much everything you just said is just terrible misinformation, and I feel sorry for your clients and the hell you must put them through. You are the guy who gives the rest of us a bad name, get educated on your career man!
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Stephen Haley…, Agent, Sacramento, CA
Thu Apr 26, 2012
FHA does owner occupied financing, so if your original intent is to occupy then yes, if your original intent is to flip, then probably not. You are asked upfront if you intend to occupy this as your primary residence. There are many options available. Explore.
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Michael Smith…, , Roseville, CA
Thu Apr 12, 2012
Jordon, if you buy the property and then sell it, I see no problem with that. There is no restriction on buying a home FHA and then selling it. You are the owner and that is your prerogative. Will the lender be a little angry? Probably but I see no difference in buying the home and then you have to move (for whatever reason) and then have to sell it.

If you need help with the financing piece, I would be more than happy to assist with out prejudice.
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Max Boyko, Agent, Sacramento, CA
Fri Mar 23, 2012
I don't think you'd be able to do that in this market either way... there is so much competition on any properties that make a profit with cash buyers that the extra loan fees and process may put you underwater. However, anything is possible!
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Jim Walker, Agent, Carmichael, CA
Sat Mar 17, 2012
Not FHA! FHA stopped investor owned 203K loans in 1996. There is a proposal from the National Association of Realtors to bring it back. It is a long haul to get legislation or an administration ruling enacted to bring back 203K loans for investors.

In my opinion the NAR has bigger lobbying priorities.

House flipping gets PR for amazing profits, but the reality is that competition makes it a low margin business. If your cost of funds is 11% of your rehab project and your competitor's cost is 1%, that competitor can bid more for that fixer you both want, because his costs are lower.

I think both liberals and conservatives can agree that asking FHA to lift the moratorium on 203K investor loans would be granting special favors to special interests at taxpayer risk, and possible taxpayer expense. It would also be a tool of government sponsored income redistribution.…
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Bob Willett, , Sacramento, CA
Thu Mar 15, 2012
If you are asking what you as a buyer can do, I don’t know of any restriction on selling the home even one day after closing escrow. You could have some issues with “intent to occupy” issues, but the fact is you can pay of the loan at any time with no penalty, and there are no restriction on selling the home. The loan officer that helped you and the mortgage company they work for will be very, very unhappy with you as it may costs them a lot of money depending on how the loan was priced. The bigger issues will be with the new buyer trying to get financing and your ability to get another FHA (or any owner-occupied loan) based on having such an early payoff on your credit report.
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, ,
Wed Mar 14, 2012
Jordan - if you knew there was a great chance of losing your entire commission due to the subject property being flipped, would you still move forward in using FHA financing?

This is what we face given this situation...

The 4 month period is what most lenders used for determining an early payout penalty (penalty is complete forfeiture of loan officer's commission, could lead to licensing restrictions also)...

I don't mean to come down hard on you here, I know you're simply fishing for information...

Hopefully I've painted a very clear picture regarding this topic, and why most lenders simply don't want to be involved in this scenario...

Hard money lenders typically won't have an issue with flipping, but you're obviously aware of the high down payment requirement...

Best, Jeff Marr
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Max Boyko, Agent, Sacramento, CA
Thu Aug 25, 2011
I Believe most lenders require a year before you can sell or even rent it out. Not sure but I would verify with your preferred loan officer.
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, ,
Sun Aug 21, 2011
The Fannie Mae HomePath loan program permits you to purchase Fannie Mae owned homes at with as little as 10% down payment - otherwise with investment financing you are looking at least 20% down. Like Merritt said, you do not want to use FHA financing for what you are intending to do as that is not what the FHA loan program was designed for.
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