Effective October 12th, the major mortgage insurance companies will be changing their guidelines in regards to property flipping. The new requirements are:
• If the seller acquired the property fewer than 90 days from the date of the
purchase contract, the loan is ineligible.
• If the seller acquired the property more than 90 days but fewer than 180
days from the date of purchase contract, the loan requires a manual MGIC
underwrite. Form 1004 / 70 will be required.
• The following property sales/transfers are not required to meet this policy
where the seller is:
1. A lender, mortgage investor or a mortgage insurance company
that acquired the property as a result of a foreclosure
or a deed in lieu of foreclosure.
2. A spouse who acquired the property through a divorce settlement.
3. An employer that acquired the property through its relocation
program.
4. An administrator, executor, or personal representative selling
property of an estate.
What does this mean to you as a buyer?
Well if you contract for a property after this date and the property has been not be owned by the seller and does not meet one of the exceptions you simply will not get a loan on the property and you will have wasted your time and money.
If the property falls under the 90 to 180 days guidelines the seller will probably have to provide information as to the types of improvements and their costs that the seller did to the property. This will take additional time and there is the possibility that the loan will not go through.
Before you as a buyer make an offer on a property, I would recommend that you have your agent check on how long the current owner has owned the property.
