Anti-flipping rules attempt to slow the home buying process down in order to prevent fraud.

In the aftermath of the real estate melt-down, FHA imposed “anti-flipping” rules.  These rules were designed to slow the buy-then-sell process down and help catch or prevent fraud.

Basically, if you wanted to buy a home using FHA financing, the seller of that home would have to own it for a minimum of 90 days before you could make an offer on it.  FHA then loosened those guidelines so that if the seller of a property were a bank (i.e. foreclosure), the anti-flipping rule would be waived.  In February2010, in an attempt to help move excess inventory off the real estate market, FHA put a temporary suspension on the anti-flipping rule.  Essentially, someone could buy a home one day, then turn around and sell it the next day, even if the buyer was using FHA financing.

Not much has been said about “anti-flipping” in the conventional lending world.  Fannie Mae and Freddie Mac have never imposed a 90-day waiting period to avoid flipping.  However, many buyers are surprised to find out that some lenders and, more importantly, many mortgage insurance companies have often set their own rules.

Let’s say you have 10% to put down on the purchase of your new home.  It is likely that a conventional mortgage will have more benefits to you than an FHA mortgage.  So you find the perfect house that a home investor just remodeled.  You place your offer and start the mortgage underwriting process.  If your loan officer does not navigate the journey well, you could have an unwanted surprise before closing.

Even though the lender says they will lend you 90% of the value of the home.  Many mortgage insurance companies will not insure the loan unless there has been a 90-day seasoning period.  If your loan is not insured, you will be forced to put another 10% down (totaling 20%) or you may have to wait until the 90-days has passed and start the process all over.  Either way, this could be a very frustrating experience.

It’s important to understand that even though there are many general guidelines that dictate the mortgage and real estate industries, every circumstance is different.  We are currently in a world where no one wants to take on too much risk.

Be sure to communicate clearly with your lender early in the process so they can identify any potential red flags and help you avoid them along the way.