first time homebuyers

The FHA’s “Anti-Flipping” Rule and Dorothy, the Wannabe First Time-Homebuyer.

Once upon a time, there were fantastic loans widely available that were backed by government “FHA” insurance. Down payments as low as 3.5% were made available to encourage homeownership by The Wizards of Oz, and homebuyers flocked down the path of golden bricks. All was well in the land of first time buyers until the Wicked Witch of the East decided to throw a flying monkey wrench into the game and passed the evil anti-flipping rule (as codified in 24 C.F.R. § 203.37a) which prohibits the FHA from insuring loans on properties which have sold within the last ninety days. While the Good Witch of the North temporarily suspended the anti-flip rule, it is currently scheduled to go back into effect in June of 2009.

Thus, these days, even if you are a legitimate flipper (and add value to the property), the buyer won’t be able to get an FHA backed loan until your ownership is property “seasoned” – i.e., aged to perfection. The upshot: If you plan to flip to FHA buyers, expect that you’ll have to wait 90 days before you get the property under contract and then perhaps even longer get to closing. (This may not be a problem if you have a lot of work to do). This can be avoided by simply using conventional financing, but that eliminates a lot of buyers, and profits.

In our opinion, the anti-flip rule needs to go – all it does is discourage people from fixing distressed properties and making nice housing affordable to all, including Dorothy, the Tin Man, and the Cowardly Lion.

first time homebuyers

Don’t Be Surprised By a Bad Credit Report!

First things first – you need to know what your current credit report looks like. You have a legal right to a free credit report only once a year from the three credit reporting agencies. However, many smart people check just one of the three every four months (spaced out) to keep from being surprised at the end of the 12 month period by a bad credit report.

Here’s how to get your report (courtesy of the FTC)

How to Order Your Free Report

The three nationwide consumer reporting companies have set up one website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form (PDF) and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can use the form in this brochure, or you can print it from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months.

You need to provide your name, address, Social Security number, and date of birth. If you have moved in the last two years, you may have to provide your previous address. To maintain the security of your file, each nationwide consumer reporting company may ask you for some information that only you would know, like the amount of your monthly mortgage payment. Each company may ask you for different information because the information each has in your file may come from different sources.

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